I hear it’s far better to take angel money than VC money. VCs tend to want to kick the founders out and bring in new CEOs. They also have terrible terms and liquidation preferences. Should I simply avoid VCs altogether?
by Charles Swan at The Virtual CFO
The short answers are NO, NO, NO, and NO!.
Angels can provide early stage money, but generally don’t have the staying power to fund through exit. During the transition from angel to institutional investors, there can be friction as to valuation and other matters. Angels, as well as VCs can provide valuable advice and introductions.
VCs enter a transaction with the intention of optomizing the return on their investment. There are instances where VCs will invest, knowing that there are weaknesses in the management team that may need to be correctied in the future. Many investors will give the team the opportunity to prove themselves, as many founders have exceeded everyone’s expectatins and successfully taken companies to be significant public entities. There have been instances of investors targeting founders, but they are rare.
Ther terms and preferences are all negotiable. You should have an experienced attorney and CFO assist you with these and other terms.
If you try to avoid VCs altogether, you may exclude yourself from many opportunities. Without knowing more about your venture, I couldn’t suggest taking either the angel or vc route.