There is an obsession with raising venture money from top tier VCs. Taking in money from a VC that also invested in Facebook, Twitter, Snapchat, Instagram, etc. may seem like a great thing to be able to tell other people.
“Oh yea, we have the same investors as Instagram.“
Whoop-de-friggin-doo!
The thing is, it really doesn’t matter. It may make you feel good in front a certain type or group of people, but it is not going to make mainstream people or businesses use your product/service/offering. In fact, they’ve probably never heard of KCPB, Sequoia, Accel, NEA, AH, USV, Spark, or any other VC or seed stage fund. For them it is more about what your product/service/offering does and why they should care.
The truth is:
- Startups raising money from top tier VC’s aren’t always successful
- Expectations get higher when you raise from top tier VC firms
Now, I’m not trying to discount what investors bring to the table. Obviously they bring capital to operate a business. Time and time again, I have seen investors help identify and recruit essential employees. They can give feedback on your product/service/offering. They may also help you get some press coverage. But at the end of the day it is up to YOU to make your business a success. Your investors have tons of companies in their portfolio and only a limited amount of bandwidth to help, so don’t depend too much on them.
What I am trying to emphasize here is that some startups seem to believe all their problems will be solved if they can just get investor “X” to lead or participate in their fundraising round.
Don’t believe this. It’s toxic. You are better off finding a specific investor that gets your business at a less prestigious VC than taking money from a Tier 1 just to say you have a Tier 1.
VCs will help you think big about your business, might help you recruit some key personnel, and may even play a key part in getting you acquired (if it comes to that), but they will not solve all your problems. You need to do that yourself.
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