Last week I asked a VC friend how founders should think about taking venture capital investment and when they should not take it.
His answer: What’s the ROI for founders of taking outside investment from venture investors?
If you spend any time with a professional venture investor, you’ll hear them talk about ROI all the time.
They are chasing the highest expected Return On Investment that has the best chance to pay back their own investors with the return they promised.
Investors are not confused by ROI math. It’s their job.
They want their expected 10X, at least, in every investment.
But startup founders usually don’t talk about ROI at all. As in, “What’s the ROI for us of taking this outside investment?”
This week on the Practical Founders Podcast, I interviewed practical funder John Francis, the general partner of the Stout Street Capital venture fund based in Denver, Colorado.
Stout Street Capital has made 70 small seed and pre-seed investments in software startups outside the big tech centers in North America.
Almost half of their investments are in practical startups with efficient growth, reasonable valuations, and sensible exit expectations.
This interview isn’t about selling VC funding to founders. There’s too much of that already.
I asked John the questions practical founders would ask a friendly VC to understand how the funding game really works from the funder side of the table.
John explains how founders should think about taking any outside investment in ROI terms.
Many times venture investment is not the best bet for the founders, so they shouldn’t take the investment, John says.
A win-win for founders and investors is when founders choose to take an investment because there will be a better outcome than not taking it.
Not because founders are desperate for cash or because “it’s what everyone does.” That usually doesn’t end well for founders.
This interview will be an eye-opener for any founder who thinks getting VC investment is easy, risk-free, or without high expectations.
Listen to this practical funder interview on the Practical Founders Podcast.
Thanks for sharing your practical insights for founders, John!
#practicalfounders
