LOL: More Start-Ups Have an Unfamiliar Message for Venture Capitalists: Get Lost

On a sunny Saturday morning in New York a few months ago, a group of 50 start-up founders gathered in the dank basement of a Lower East Side bar. They scribbled notes at long tables, sipping coffee and LaCroix while a stack of pizza boxes emanated the odor of hot garlic. One by one, they gave testimonials taking aim at something nearly sacred in the technology industry: venture capital.

LOL: More Start-Ups Have an Unfamiliar Message for Venture Capitalists: Get Lost 13ANTIVC-01-articleLarge

LOL: More Start-Ups Have an Unfamiliar Message for Venture Capitalists: Get Lost 13ANTIVC-01-articleLarge

Josh Haas, the co-founder of Bubble, a software-writing start-up, told the group that he and venture capitalists “were pretty much totally on different wavelengths” about the trajectory of his business.

Seph Skerritt, the founder of Proper Cloth, a clothing company, said that the hype around raising money was a trap. “They try to make you feel inferior if you’re not playing that game,” he said.

The event had been organized by Frank Denbow, 33, a fixture of New York’s tech scene and the founder of T-shirt start-up Inka.io, to bring together start-up founders who have begun to question the investment framework that has supercharged their field. By encouraging companies to expand too quickly, Mr. Denbow said, venture capital can make them “accelerate straight into the ground.”

The V.C. business model, on which much of the modern tech industry was built, is simple: Start-ups raise piles of money from investors, and then use the cash to grow aggressively — faster than the competition, faster than regulators, faster than most normal businesses would consider sane. Larger and larger rounds of funding follow.

The end goal is to sell or go public, producing astonishing returns for early investors. The setup has spawned household names like Facebook, Google and Uber, as well as hundreds of other so-called unicorn companies valued at more than $1 billion.

But for every unicorn, there are countless other start-ups that grew too fast, burned through investors’ money and died — possibly unnecessarily. Start-up business plans are designed for the rosiest possible outcome, and the money intensifies both successes and failures. Social media is littered with tales of companies that withered under the pressure of hypergrowth, were crushed by so-called “toxic V.C.s” or were forced to raise too much venture capital — something known as the “foie gras effect.”

https://www.nytimes.com/2019/01/11/technology/start-ups-rejecting-venture-capital.html

LOL: More Start-Ups Have an Unfamiliar Message for Venture Capitalists: Get Lost

LOL: More Start-Ups Have an Unfamiliar Message for Venture Capitalists: Get Lost

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