When to Quit: Founder Opportunity Cost
March 12, 2025
You have to be incredibly resilient to build a company from idea to IPO. Almost everyone who has made it will tell you there were many times when their company almost shut down.
When you take a multi-million dollar check from a VC, they’re really only looking for 1 of 2 outcomes. This can cause some very strange behavior in the future. Let me explain:
Obviously, the ideal is your company grows exponentially from the moment they invest and in several years you IPO, giving them a 1000x return and making their career. Everyone is happy.
Perhaps less obvious, if you’re not on the path to a massive 1000x return in short order, then your VC will most likely prefer you fail quickly. This isn’t mean, it’s rational — they understandably don’t want to spend years of their life on something that won’t be influential.
If you’re in the messy middle, not an abject failure nor a massive success, you may find your VC begins to pressure you to sell the company or raise another round, even if it doesn’t make financial sense for the company. They need you to be a big win or stop absorbing time, it’s that simple.
Alright, thanks a lot for watching and best of luck out there.
