Why do you need my money?
- Author: Anirudh Damani
- Posted: 15/03/2018
I posted one of the Q&A interaction answers from a founder on all my social media channels yesterday. Some people took it as a joke about founders (it wasn’t) and quite a few asked what investors expect a founder to say when they’re asked, “how would your plans change if you did not raise this money?”
Firstly, there isn’t one correct answer to that question. So, I don’t have a perfectly worded response for founders to read and parrot to other VCs. The underlying question that the founder should be answering in this question is, “why (do I need) am I raising outside capital to run my business?”
If the founding team has given careful thought to that question at the genesis of the fundraise then the pitch deck, elevator pitch, financial model and the responses to our detailed questions will clearly answer reflect that. The founders will not be saying things like their sustainability (or lack thereof) is dependent on outside capital. The apathetic attitude towards investor capital is a sign of entrepreneurial immaturity if not malicious intent, and the latter is obviously worse.
When founder’s do not understand that the risk capital invested must be returned with massive multiples, (read: investor math) they ask for extravagant market rate salaries, fancy offices or other shenanigans that have sunk many a startup ship. Therefore, when the founder says that they will run their business sustainably without VC money instead of pointing out how the growth plans would be hampered without the investment, it clearly indicates the motive of the founder… and let me be clear, they aren’t good.