The new world of a stubborn dreamer
#69 Angelinvesting.it - From idea to Series A - Weekly Newsletter
Dear reader,
The entrepreneurial landscape is shifting, and an increasing number of founders are rejecting venture capital funding in favor of self-financing their ventures. While this may seem surprising, there are compelling reasons behind this trend.
The Double-Edged Sword of VC Funding
When a founder accepts VC investment, they essentially strike a Faustian bargain. In exchange for a substantial cash infusion, they surrender a degree of control and flexibility. The founding team's ability to reap substantial profits without achieving stellar growth is compromised.
Without VC funding, if a company reaches revenues of $5-10 million with a healthy EBITDA, the founders can pocket considerable sums annually as the company belongs entirely to them.
However, with VC investment, if exponential growth fails to materialize, the founding team risks being ousted, and the company could face liquidation. Furthermore, various clauses and early or lackluster exits could mean that founders receive only a fraction of the returns.
The Driving Forces Behind Self-Funding
Two key forces are fueling the shift toward self-funding:
Increased Awareness of VC Risks: Founders are becoming increasingly cognizant of the potential pitfalls associated with VC capital. Social media platforms like Twitter are rife with tales of founders who achieved million-dollar exits but walked away with little due to multiple funding rounds and restrictive clauses. A sense of disillusionment with VC money is palpable.
AI-Enabled Cost Reductions: The alternative to VC funding – bootstrapping growth – is more feasible than ever before. Artificial Intelligence is dramatically reducing organizational costs, and startups with sharp-eyed founders are the first to seize the opportunities this technology creates.
The Potential for Billion-Dollar Self-Funded Ventures
Sam Altman, CEO of OpenAI, recently envisioned a world where billion-dollar companies are run by a handful of people leveraging AI extensively for scaling. I would add that some of these projects may flourish in a self-financing context.
The most intriguing aspect of this new world is the possibility that somewhere, a tenacious dreamer armed with an idea and an execution path could create billions in wealth without relying on external funding.
As the entrepreneurial landscape evolves, the allure of self-funding is becoming increasingly compelling. Founders are rejecting the conventional wisdom of "go big or go home" and charting their own paths to success, fueled by their unwavering determination and AI.
Have a great weekend,
Simone
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