Q: How stressful is it to run a venture-backed startup?
Being a CEO in general is pretty stressful. 🙂
Being venture-backed is really only more stressful than any other company for two reasons:
- You have to carefully manage to your Zero Cash Date. You need to know exactly when you run out of money. More here: Knowing — and Sharing — Your Zero Cash Date | SaaStr. Of course cash in the bank also matters if you aren’t VC backed. It’s just different. VC cash in the early days is used to let you run at a larger loss than you otherwise would. But it doesn’t last forever.
- You have to carefully manage to your investors’ growth expectations. When you bootstrap, you (and your team) determine your growth expectations. But when you take VC money, that’s no longer the case. VCs will expect you to do whatever you can to grow at outlier rates, to at least try to build a unicorn.
So the pressures to both manage your cash and also increase / maintain your growth rate are higher if you take VC money. Sometimes, much higher. And they go up, the more you raise.
Don’t like the stress? Then maybe:
- Don’t spend it all. Just because you’ve raised it, doesn’t mean you have to spend it. Do not listen to VCs that pressure you to spend what you’ve raised. They don’t know. You know. At least, you know the most. Many of the top-venture backed start-ups in B2B and SaaS literally spend less than half of what they raise. More here.
- Raise less. The less you raise, the less pressure you’ll be under to achieve insane numbers, and a unicorn exit. Your investors want to see an “exit” of at least 10x what they invest. The less you raise, the less pressure here. A bit more here: The 10x Rule: What Raising $1 of Venture Capital Really Means | SaaStr
- Embrace it. Raising venture capital may push you to go bigger. The best of us tend to rise to meet expectations. Having the stakes raised may lead to a better outcome for you. If you just raised at $100m post, well yeah, now you do have to build a $300m+ company. Maybe you’ll look back and be grateful for that slight kick in the rear. Sometimes, having an “exit strategy” and maintaining optionality is good. But sometimes, it just holds us back from really going for it.
It is OK to raise less. It is OK to hold off on a Series A, or a Series B, or a Series C for now — even if you have multiple offers, even if the terms are very attractive. Atlassian waited. Qualtrics waited. Align what you think you can achieve with the capital you raise. And take a little risk. Let yourself be pushed. We all need that sometimes. But not beyond what you believe.