TL;DR - VCs can bring many benefits table, but also have many demands.
Helpfulness - 5 (also beginner-friendly)
Topic Tags - Fundraising options, VC pros & cons, VC terms and conditions, VC incentives
- How are VC investments different from other fundraising options?
- How do VCs make money?
- How do VCs help develop a company?
- What interactions can take place between founders and GPs?
- What are some common problems in VC?
- VC are incentivized to increase their Assets Under Management (AUM).
- VCs aren’t the speediest when it comes to writing checks, but they can provide the most funding, industry expertise, and outside help.
- VCs also have a strong ability to follow up on investments but often demand board positions and are stingy with liquidation preferences, often demanding multiples and participation rights.
- VC incentives fit with founder’s incentives but don’t perfectly align, therefore it can be said that “Venture funding is fuel — you either take off or get burned.”
- Start-up Board positions explained https://techcrunch.com/2016/11/05/what-you-need-to-know-about-startup-boards/
- Dilution explained with visualizations https://techcrunch.com/2011/10/13/understanding-how-dilution-affects-you-at-a-startup/
- ‘Cap table’ jargon https://www.investopedia.com/terms/c/capitalization-table.asp
- ‘Pro Rata’ jargon https://www.investopedia.com/terms/p/pro-rata.asp