TLDR: This article discusses four smart strategies that unicorn-entrepreneurs can use to overcome barriers when seeking venture capital (VC) funding. The key points are:
- Only 2% of VCs earn 95% of VC profits, and home runs are rare in the VC world. Entrepreneurs who are successful in VC-funded ventures can become very rich.
- Entrepreneurs who stay as CEO and retain their equity do well, while those who hire a professional CEO may experience heavy dilution of their equity.
- The four main hurdles that entrepreneurs face when seeking VC funding are a lack of entrepreneur credibility, high VC dilution, finding the right growth financing, and the need for VCs to exit.
The strategies to overcome these hurdles include:
- Establishing leadership potential before seeking VC funding to attract investors who will invest in the entrepreneur as well as the venture.
- Focusing on reducing financial needs and the number of VC rounds to decrease dilution and increase the chances of staying as CEO.
- Using a variety of financing sources and instruments to find the best financing for both the venture and the entrepreneur, while maintaining control and reducing dilution.
- Considering IPOs or subordinated convertible debt as exit strategies for VCs, and seeking funding from reputable VCs to increase the chances of a high-value exit.
