and when they should decline.
What important is the return on investment for founders from venture capitalists?
If you spend any time with a professional venture investor, you will constantly hear them discuss ROI.
They are looking for the highest predicted Return On Investment with the best probability of paying back their own investors with the promised return.
ROI math does not perplex investors. It is their responsibility.
They demand at least a 10X return on every investment.
However, startup founders almost seldom discuss ROI. As in, “What is the return on investment for us on making this outside investment?”
This interview isn’t about pitching founders on VC money. There is already far too much of that.
The questions that a practical founder would ask a friendly VC to understand how the fundraising game works from the funder’s perspective.
In terms of ROI, how should entrepreneurs consider accepting any outside investment?
Often, venture capital is not the best bet for entrepreneurs, thus they should decline the investment.
When founders choose to take an investment because the outcome will be better than not taking it, it is a win-win situation for both founders and investors.
Not because the entrepreneurs are eager for cash or because “everyone does it.” That rarely ends well for founders.