To VC Fund or Not?

Manu Pillai
3 min readMar 23, 2021


I’ve been asked by friends and founders about raising VC funds. In many cases the businesses had customers, revenues, differentiation and profits — but were not a match for VC funding. Bootstrapping and alternate financing was viable and probably better for them.

For fundraising, develop a thick skin, learn from meetings, and know when to move on. ©

There are thousands of sizable firms that have grown in this way over the years — TATA, Toyota, Bosch, Denso, Olam … are all examples.

So when should one raise VC funding?

  • Raise VC funds when your early stage company can line up a massive and profitable market that can be captured quickly with the help of a cash infusion— before the revenue+cash engine has kicked in and started driving profits and positive cash flow.

That’s basically it.

In every scenario with team and technology equal, the market wins. All we really do is figure out how to enter [1] and earn market share[2].

Only go down the VC path if your business model enables you to be fast-growing. Or you are a deep-tech firm where the early milestones are complex, but perhaps related to customer acceptance criteria. In this case, the VC must understand deep-tech.

Sometimes, you’re better off building the company and working with customers [3] or raising R&D funds from the government through NSF SBIR/STTR as Qualcomm and Google did before taking up other investors. (Note that NSF grants do require significant domain expertise.)

Paper accepts any ink. Make it count. © Photo by Pixabay from Pexels

Just doing it and building your company also helps clearly establish the DNA of the company [4] — key if you are building a mission-based company that will need a durable and meaningful culture.

It may possible to bootstrap your company to the point where an infusion of capital will enable faster growth. At that point, VC funding is one of several choices. Or, in the case of deep-tech company, it could be you are now ready for scaling after key milestones, and VC funding is now the right choice.

Other valid choices include equity crowdfunding, revenue based funding, bank loans/working capital and strategic investors. A solid CFO would be helpful here — and there are many competent on-demand CFO’s available to help. When raising funds, YC has a useful guide on the handshake protocol [5] and an extensive library while NFX fills in gaps that YC misses [6] and provides interesting viewpoints on market structure in particular.

Something worth noting is that if you take on VC funding with the resulting loss in ownership, the pie needs to get really big to compensate — for you and the VC firm. An exit event results in others being paid first — the bankers, the lawyers, the Preferred Shareholders (AKA equity investors)and tax collector. Then you get paid. So, size of market +growth rates really matter in this case.

This post was as a result of reader feedback, which is encouraged :-)


[1] See my earlier post on Market Entry

[2] Seem my earlier post on Share of Market.


“For the great majority of would-be founders, the biggest challenge is not raising money but having the wits and hustle to do without it. To that end, it helps to understand what it takes to start a business — and why that is likely to conflict with what venture capitalists require.”


“…we’ve found a consistently strong relationship between the traits of the founder’s mentality in companies of all kinds — not just start-ups — and their ability to sustain performance in the marketplace, in the stock market, and against their peers …”


Lots of information on what to do.


Lots of insight about how to think about what to do.



Manu Pillai

Interests: IoT, Climate. Skills: Startups, AgTech, Edge, NPI, Systems, Mfg @manurpillai