One of the ingenious fintech start-up founders closer to me had turned down the investors’ funds many times, and I did not understand why. I thought she had lost it. Only an insane founder would decline an investor who is genuinely interested in helping her business. I was naïve. Last week at a recent private soiree, she confided in me that once a start-up founder accepts the investors’ funds, her life would not be the same again. He enlightened me.
Once the funds kissed your account, she told me, you would assume the venture capitalist’s surname! You will become his appendage. Your business is no longer operating under your timeline, but under the investor’s rules. If you receive funds from a venture firm, you will become a puppet. If you do not dance to their tune, they will pull the plug.
Do you know why? I shook my head. Your start-up must grow at a certain geometrical pace, and if you cannot deliver at that pace, the firm will remove you, and someone else will take over your business. It is like a marathon dance. You are permanently on your feet. You cannot stop. I heaved a sigh.
On One Hand
I dug further and discovered that if you cannot manage this phenomenon painted above, it could destabilise your system: It could lead to panic attacks. Fatigue. Insomnia. As a coping mechanism, you could turn to substance abuse. Bingeing on coffee drinking. This can gradually lead to other pharmaceutical extractions like XTC, and before you can say VC, you are insane.
On The Other Hand
I equally discovered that start-up founders often decline venture capitalists’ funds for several reasons. Loss of control over the company. Dilution of equity. The pressure to grow at an unrealistic pace. Due to this, some start-up founders might not need external funding and can bootstrap and grow organically or source funding elsewhere. Some of our existing and thriving fintech companies went this route.
In The Long Term
One founder was in jail due to pressure from the venture capitalist recently. The founders of Electronic Lab Logs, Daniel Summers and Jeremy Sikorski, started a software company to modernise lab data using a cloud-based platform, rather than relying on paper logs. The firm managed to grow the business during the volatile economic days of the pandemic.
In 2020, WilmingtonBiz.com wrote, the firm won a $50,000 grant from the NC Idea Seed Programme, a Coastal Entrepreneur Award. Got $3 million in funding from Rockmont Partners. It placed third in the NC Bioneer Venture Challenge. Five years later, Summers was replaced as CEO of Lab Logs. The board [backed by the venture firm] asked him to step down because of his “head space.” He could not take it. He broke down. He had to undergo a psychiatric evaluation. Placed on suicide watch. After that, everything went downhill for him.
“I have never in 18 years of marriage seen my husband in that state. A lot was riding on it. There are many investors. I think that is what sparked the stress of his mental state. Then I think it just started deteriorating from there,’’ Summers’ wife said.
In The Short Term
Other people’s money is not free. It is a burden. If you cannot bear it, do not accept it.
