If you are a founder that takes a lot of Cash and your company isn’t growing in leaps and bounds like facebook chances are you aren’t going to be holding more than 5% of your company if a payday comes along according to the clickz’s article (Union Square Ventures has a presentation saying less than 10%) .
The author says that if you build quickly and sell quickly you’ll make more money. I agree with that, but if you are a programmer you really don’t need any VC money and can build a decent product in your spare time. Taking your hobby company to $100,000/year in profit is the same thing as holding 5% of a company that makes $2 million a year in profit. Not only will you own 100% if your company but chances are that you are far more likely to be successful AND have a buyer AND its far easier to grow to 200k in profits than it is to get to 4 million in profits.
You’ve probably heard 90% of business’s fail in the first year. Its probably the biggest urban legend in the business world that won’t die. The US government says that 65% of new business’s are still operating after 4 years. There is a report that says more then 66% of companies founded in 98 -2002 are still operating today.
Anyone know what the average VC success rate is? I bet its no where near 50% or even 30%. Would be interesting to see how much money founders walked away from in smaller VC deals. Even for something as huge as myspace the “founders” only walked away with $5 million or 1% of the sale price. What would you rather own, 100% of something or 5% of a dream?