What if VC disappeared?
Well, obviously, Patagonia sales would plummet
Hi all —
Quick PSA: I’ve been hard at work planning a 3-week PMF Sprint for a small group of founders. The content makes everything I’ve done before look like preschool fingerpainting. January’s PMF Sprint is full, but if you want to get on the waitlist for ~March/April (or if I decide to open a few more slots for Jan) - check pmfcamp.com!
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I’ve been doing a fun thought exercise with a few founders. Just one question:
“Imagine that, on January 1, 2024, venture capital ceased to exist. What do you do?”
If VC just *disappeared*… how would you build your company differently?
This scenario isn’t too far from reality. Combine rising interest rates and a pullback from VC as an asset class… 2024 is shaping up to be an interesting (aka awful) year for the venture capital industry. If I were a betting man, I’d say to expect:
Funds closing down or downsizing
The return to “power law” behavior - a tiny percentage of winners can raise, everyone else can starve (in both VC and startups)
Valuations & round terms that reflect the true risk & value of your business (yikes)
Sure, maybe you can raise a pre-seed or a seed round. But a seed extension? Series A? Series B? IDK.
Which means… unlike the past ~10 years, your next round is far from guaranteed even if you’ve hit top-quartile SaaS Napkin math on your metrics.
The thought exercise
You’ve been gaslit with a stupid dichotomy:
VC = fast growth, hip companies that get to billions of dollars
Bootstrap = slow growth, “indie hackers” eating ramen and praying that SEO kicks in someday
You’d be forgiven if you assumed that if VC just disappeared, you’d be trading your apartment in for a spot at the local dog kennel.
But that’s bullshit.
Look at Paycom, Paycor, Paylocity, & Paychex - all direct competitors in the payroll space. (There are more, I just selected the ones with the word “pay” in their name.) These companies are basically all 100% bootstrapped, save for some PE rounds that cash out some of the founders. They’re all in the hundreds-of-millions to billion dollars in revenue… and have grown fast. They’re unsexy payroll software businesses based out of like fucking Oklahoma.
The lesson? There are ways to grow fast & build a solid B2B software company without external funding. People way dumber than you have done it.
Thinking about how you’d do this might just unlock a better business — one you actually enjoy running, that doesn’t become a kafkaesque cash-incinerating middle-management-nihilist-authoritarian politburo. Or worse, a lottery ticket.
So go do the thought exercise. Feel free to email me back: If VC disappeared tomorrow, how would you build your business differently?
Love,
Rob