VC funding isn’t bad. It’s just not for most startup software companies.
More than half of VC-funded companies wash out completely with no big prize for founders and their employees.
I just met Dave Whorton of The Tugboat Group. He has a lot to say about this.
Dave was a wildly successful tech founder in Silicon Valley (Good Technology, drugstore,com) and he spent time as a VC too.
For the last 15 years, he has been focused on helping what he calls Evergreen companies: world-changing growth companies that haven’t raised VC capital and don’t have plans to sell.
We talked about how many growing startups and serious companies there are in the world that aren’t raising big investments from VCs or other outside investors.
We also talked about almost all the conversation and the focus is on VC funding, unicorns, and IPOs.
Dave told me a funny story about a big-time startup lawyer he knows in Silicon Valley.
Dave asked him how often he forms a new startup company as an LLC.
The lawyer told him, “Dave, we have never helped someone form an LLC.”
Simply put, LLCs are for founder-owned businesses, and the C Corp. is used for companies that will have outside investors.
This law firm assumes every company will raise big money. And spend it too.
Big funding has become the assumption and the rule.
It has been called the Golden Rule: He who has the gold makes the rules.