Onerous VC Terms Stifling Innovation?

from the maybe-possibly dept

Business Week has an article talking about all the ridiculous onerous terms that VCs are forcing on companies they fund these days. The article suggests that these terms are incredibly shortsighted, and are more likely to hinder innovation that help it. I have a few thoughts on this. At first glance, I agree. I think that ridiculous VC terms don’t help – and are not what a VC should be about. However, I also think that such things could, in other ways, stimulate innovation by making companies be more creating about how they get started (possibly without VC funding). I’m all for companies figuring out ways to be successful without ever having touch any venture money. However, there are some cases where venture money does make sense – and when that happens, onerous terms are silly and a waste of time and money. They quote one long-time entrepreneur who says that today’s entrepreneur’s should stop complaining, because this is how it was in the days before the bubble (“why, back in my day, we had to walk uphill both ways in the snow to get our venture capital… these kids today…”). Anyway, he’s wrong. There’s absolutely nothing wrong with VCs making it difficult to get funding in this environment – but it is a mistake for them to on top of that make the terms take away all the incentives to build a real, solid business.

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Comments on “Onerous VC Terms Stifling Innovation?”

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sb says:

No Subject Given

Whether it works or not is another issues altogether. But Get real. if VC’s fund your firm, you do whatever the fuck they say., THEY ARE THE BOSS….THEY OWN THE FUCKING COMPANY (or at least a part of it).

If you dont understand that the OWNER spells out the rules, than your a clueless idiot.

Mike (profile) says:

Re: No Subject Given

Um… no. That’s actually not true at all. Yes, if they have a controlling stake they have a lot of say, but many times the VCs won’t have a controlling stake.

Many times even when VCs do own a controlling stake in the company management doesn’t do what the VCs want them to do – which is their perogative as management. Though, of course, in doing so they certainly risk getting fired.

Of course, if you had actually read what the article was talking about you would realize this has NOTHING to do with whether or not the VCs tell you what to do or not as a company. It has to do with the TERMS OF FUNDING – which would be BEFORE they own you.

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