Venture capital for startups is dead

👋 Hi all,

I finally pricked the bubble on a topic that I believe will dry up, die, or completely vanish for startups: venture capital. I will write more about the change I see happening in building a startup.

I also included the movie I saw in the local cinema this Saturday and a brilliant out-of-home campaign for the final season of Lupin on Netflix. 🍿 

See you on Friday,

Bas

My topic today is inspired by a few things I read, saw, and observed lately. It’s about venture capital for startups and why I believe it’s dead. Yup, there I said it: Venture capital for startups is dead.

Venture capital will play a significant role in the upcoming decades, but for the startups I’m referring to, it won’t be the preferred option any time soon. Since last year, the economy has shifted significantly, with interest rates rising, inflation rising, and likely more sticky than we thought. What we saw amongst founders and their startups was more down rounds, more bankruptcy, and the (forced) focus toward profitability. Growing your business at all costs is dead.

For years, VCs were the ones opening doors, telling founders how to build their businesses, and it all needed to happen quickly. As soon as the founders closed their current funding round, they already knew, based on their runway, that they needed to raise a bigger round in the next 12-18 months. The founders were raising a living rather than building and running their business. I’ve seen first-hand that many founders tweak their numbers and pump their spreadsheets accordingly to raise their rounds. To please people, to hand them money, and then start over again and repeat the same stupid hamster wheel.

Why would you want to grow your business by taking money from someone who will slowly take control of your company? But the moment you start to realize this, it’s too late. A death by a thousand cuts, as a good friend of mine used to say.

Many first-time-founders think this is the only way they can play the game, seeing big Silicon Valley startups 'succeed’ following this script. It isn’t, and let me explain why.

The new playbook is being written, and venture capital isn’t even playing. I already dedicated my first-ever newsletter edition to this topic, but now I feel I unraveled the difference and see a split between two worlds.

It’s the split between first-time- and second-time+ founders. Founders who just started their first business (no matter what) make the same rookie mistakes. They put venture capital on a pedestal, overthink their launch, and spend too much time on things that don’t matter.

Founders who have done it before are almost cheating. They know what works and which things to outsource, and they probably value their autonomy over money from strangers telling them how to run their business. The funny paradox is that the more experience a founder has, the more likely they are to raise venture capital.

Suppose you’re considering starting a business and pursuing that startup idea keeping you up at night. Pick your role models carefully. Pick the founders that have done it before. The ones that can tell and share stories from their personal experience.

Don’t take advice from the venture capitalist who has never been in your shoes; they’re simply spitting out quotes from business books.