🧭 Which is better: Being a Founder or VC?

Hint: I prefer being a founder!

Author

Sean from We Live to Build
September 15, 2023

Hey Builders! 🚀

Here’s what you’re going to learn today:

⭐️ The Pros and Cons of Being a Founder
⭐️ The Pros and Cons of Being a VC
❓ Which is better for you?
🎤 Why Ishan Rakshit went from founder to VC and back to founder?

Reading time: 5 minutes

⭐️ The Pros and Cons of Being a Founder

Pros of being a founder

  1. Being a founder means you have a vision, a mission, and a team ready to follow you into the depths of hell to make your dream come true.

  2. Being a founder gets you a lot of respect because:

  • People who work for others think it’s very hard to do and you must be great to attempt it.

  • Other entrepreneurs know being a founder is like a badge of honor and you’ve seen some !@#$ no matter where you are in your journey

  • VCs hope you might just be the unicorn they’ve been looking for

  1. You have immense freedom to create your company culture and decide what your team will focus on.

  2. You often set your own schedule, focus, and determine where you will physically spend your time.

  3. If your company is doing well, you can earn a lot of money in the form of salary, bonuses, and when raising funds, you have the potential to sell some shares for mini-liquidity events that can change your life.

These sound great, am I missing anything? Let us know in the comments or by replying to this email!

But surely there are cons, right? Of course there are!

Cons of being a founder

  1. Being a founder can be very lonely, because many of your struggles can’t be understood by your board, execs, managers, employees, clients, investors, or the market.

    The only people that can comprehend your struggle as a founder are other founders, and many of them are so busy focusing on their own thing that they lack the time to meet and commiserate.

     

  2. The beginning is very hard because you are by yourself trying to turn your idea into a business.

     

  3. Burnout is common and very hard to come back from.

     

  4. You will probably spend your own money to launch the business, and it will take potentially years to have a salary worth calling home about.

  5. The market is constantly changing, your clients are leaving you for competitors who charge less even though you know your product is superior, and no one cares about it.

     

  6. Your chances of failure are very high, and chances of success are very low.

     

  7. If you go the route of raising funds from outside investors, you will spend most of your time finding potential investors, pitching potential investors, keeping in touch with investors who are interested but not quite ready yet, and therefore you don’t have time to build your client base and serve them with a great product.

❓What is it you like/dislike most about being a founder?

⭐️The Pros and Cons of Being a VC

Pros of being a VC

  1. VCs have a LOT of power because they control the coin purse. They decide who they will invest in, when they will invest, how much they will invest, and how long it takes to finish the deal. This means VCs get founders coming to them all the time hoping to be their next check.

  2. VCs typically take a 2-3.5% yearly management fee from the fund, meaning if they raise $100M and commit to spending it over 2 years, they will have a budget of $4-7M USD for each of those 2 years to operate the fund, find companies to invest in, do due diligence, etc. This means if they know how to operate wisely, they can have VERY nice salaries (and often do).

  3. VCs get to be at the front of every trend because they will see all the best pitches before any of those companies become well-known. This gives them the power to influence what the market will look like several years later.

Cons of being a VC

  1. Some VCs have never operated their own businesses before launching their fund, so they may not understand the true daily struggles of the people they are investing in.

     

  2. VCs have a lot more stress than founders because they sometimes review thousands of decks each year, trying to find a few they are confident in.

     

  3. Once they invest in those companies, they have to give them resources beyond cash to maximize the chances of their success, which takes away from their time to network and find more companies or investors for their own funds.

  4. Regulatory compliance makes starting and managing funds annoying and costly.

     

  5. If the companies they invest in don’t provide returns in the specified timeline, new investors won’t back them, so they won’t be able to launch successive funds with ever-larger fund sizes.

Did I miss anything? Let me know by replying to this email or leaving a comment!

❓What is it you like/dislike most about being a VC?

❓ Which is better for you?

Both require you to have a vision of what you want to invest your energy into (software, hardware? AI, quantum? retail, manufacturing, etc??)

Both can bring incredible financial success, but it takes YEARS (5-10 usually) to see that success, IF it happens, so you must tolerate long-term focus with little to no gratification.

Both require accepting a tremendous amount of stress in your life.

Being a founder means focusing on 1 company, while being a VC means splitting your energy across MANY companies.

❓So which would you rather be?

Next steps

I interviewed Ishan Rakshit about his experience being a founder, then switching to being a VC, then switching back to being a founder.

We talked about why he made those choices, and why doing both made him a better entrepreneur.

Watch it below!

Listen to the interview here:

Next Friday we will talk about embracing new experiences, see you then!

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