Match the capital source to the company

Venture capital seeks substantial returns from businesses with large growth potential. A fund has its own investors, commitments, and time horizon. Those conditions affect how it makes decisions. They also affect what it expects after investing.

A few large outcomes can determine a portfolio’s result. An investor may therefore prefer a credible chance of exceptional growth to a modest predictable outcome. That preference does not establish a universal measure of business quality. A profitable smaller company can succeed with another financing model.

Understand the bargain before entering it. Outside equity usually creates expectations about reporting, decisions, growth, and eventual liquidity. Liquidity means an opportunity to turn an ownership interest into money. Do not accept a model for its status while concealing a different ambition.