I’ve founded four companies.

First was bootstraped and west bust. Raising funding would not have helped. It was just a bad idea, badly executed.

Second was also bootstrapped and has grown and prospered. I still control it and it makes money and has great capital growth.

For the third I raised VC ($8m) in the dot com boom, bought the company back in the bust, restarted, bootstrapped, raised more VC and then left with a reasonable payoff but nothing life-changing. This was a five year journey during which I made and lost good friends, had the family home on the line, won great customers and nearly blew up my marriage. Would I do it again? Hell, yes. Would I raise VC again? Well, maybe, but very, very carefully. In that five year period the single hardest task was managing investors whilst trying (unsuccessfully) to retain a meaningful stake in the business. The company continues today and is slowly growing. It also continues to raise VC, but there is no founder equity in the equation and the management team is 100% hired in.

The lesson… unless you are exceptionally lucky as an entrepreneur and outperform your investors’ expectations, your investors will ALWAYS get a better outcome from the business than you will. That is built into the fundamental DNA of the investor/entrepreneur relationship. You no longer have control. You have almost no flexibility or room to course correct. Your burn-rate will ratchet up and you will find it almost impossible to avoid the addictive drip of funding and dilution.

My fourth startup…. well it’s another bootstrap with a great product in a great market. Never say never, but we don’t see the need for VC in the near future. This means that everyone’s focus is on customers and product. The way it should be.

That’s why the last paragraph is there. This article is not an argument against taking investment per se, it’s a case against traditional venture capital that requires giving up control.

Tony – those are solid points. It’s funny, between the first time I started noodling this article and the time I published it, Jason raised money for his new venture. Maybe he did so while retaining control – my guess is that he has very different terms than his first round at Jobster. Also – I’d argue that sampling “successful entrepreneurs” is the reason for survivorship-bias. If you only ask the successful ones, of course your answer is positive! ps- I’m diggin’ RescueTime. Nice work on that.

Here is my argument to why I would need funding, long story short I am very worried that people with lots of money will copy my idea and gain market share (it is a brand new idea).
Anyway, I think i have made a solid decision to NOT look for funding, if funding looks for me I would then have to weigh its pluses and negatives.

While I really enjoyed your post and there is a lot of valid points for not taking the money – I think for many, (myself included) that first pop of cash be it 15K Ycom style, 250k angel, or a cool million from the VC’s – provides the ability for an entrep to say “enough with the distractions, lets freckin do this!” and there is a lot of power in that.

“When the going gets tough, those in control exert control.” means to me that something is wrong and someone needs to step in and save the ship.

I do not know. I understand some of the point Mr. Simonsen raises yet I feel that there is supposed to be a common goal in these relationships and that is success. One has the fire and the other is providing the fuel to burn it.

- I’m pretty sure Jason Goldberg left voluntarily. I think he might now be the vice-chair of the board @ Jobster. I could be wrong– I worked there for a year after their acquired my last startup, but I didn’t pay too much attention to how he left. He already has funding for his new startup, by the way.

- “taking venture capital actually reduces your odds of success.” As an exercise, find a list of every M&A last year. Here’s one: http://startup.partnerup.com/2008/01/02/2007-acquisitions-web-internet-technology/ … What percentage of them took NO institutional investment? My guess is “very few”. If your goal is M&A, it seems that institutional investment strongly correlates with that. Another interesting question is, “How many of these CEOs would take VC investment if they had to do it all over again?”. From the conversations I’ve had with lots of successful founders, I’d guess that the majority of them would. A final interesting question would be, “How many of the founders on that list got screwed/fired?” as your article suggests. My guess is “almost none”.

Yet I still can’t work out why so many founders chase the VC rainbow. I’m a developer – I want to write code, not investment memorandums.

A Tech company I used to work for were VC fiends. Management would spend weeks carefully preparing their PowerPoint presentations and delivery techniques, undergoing due-diligence audits with accounting firms, and ‘pitching’ to just about any shmuck with a cheque book. The disturbing thing is they’d invest so much of their effort into this that they’d invariably neglect their projects of the leadership and vision they required to be successful in the first place (and could have been successful – without VC). CEO got his wish in the end with a $250k initial investment. He was fired within 6 months and stripped of his shareholdings when the investors got serious…. Why would you do it??? To me (in software / web anyway) bootstrapping isn’t a choice, it’s the only realistic modus-operandi.