Venture capital investment has become a staple of the tech sector, and almost every reasonably sized venture ends up getting some amount of venture capital. While the range of investments is large, it's usually in the millions of dollars.
While having money on hand to grow a business is great, there are usually significant hooks that come with venture capital money. Chief among these is the expectation that to pay back investors the company will either sell out or go on to have an initial public offering (IPO). But there are subtle and potentially more serious consequences as well.
Large amounts of venture capital forces companies down a path with limited timeline and a limited set of outcomes. While this can be right for certain companies, for others it will harm their culture, creativity, and ultimately their ability to make money.
Pushing it to the Limit (too much)
Why would taking venture capital money harm a companies ability to make money? Simply, not all concepts are born the same, and many concepts take a long timeframe to prove out. For instance, Constant Contact took nearly seven years to begin making any substantial amount of money (their revenues now stand at $280M).
More importantly, while constraints in general improve creativity, being under the gun constantly rarely if ever makes people creative. Many famous creative thinkers had a whole range of activies they would do throughout the day that had little if any relation to their creative work. Yet, it was those very activities that allowed them to be productive when they did work on creative things.
What about the culture of the company? In most cases, it's something that usually gets left to the wayside, an accident of the activities, pace, and tone of the company overall. Yet, the culture is one of the main products (if not the main one) that any company makes. Companies like Google, Apple, and Microsoft didn't get to the top by cutting corners and racing along. They got to the top by work conciously and consistently over time to develop great products and culture.
When they zig, you zag
With that, enter Indie dot VC, the investment companion to companies that want to take it slowly. The idea is simple, it's an equity investment just like most investments are, but rather than paying out investors by selling the company they are paid back by dividends over time. As it stands it's an experiment, but it's a very worthy one.
The reason is simple, the predominant investment model in technology makes it difficult to build a culture and a company that consistently produces value over time. It's about growing at a reasonable speed, and adding deliberately to the core of your product.
At Linkship we often take our time when thinking about our product and the features that our product has. Sometimes we spend whole blocks of time just sharing videos, talking about life, drinking beer, and taking it easy. We call these times our "culture time".
We do it because we enjoy it, but we also do it because we know that many people don't want to be worked to death. We also know that those people produce their best work when they are happy, well rested, and aren't forced to a pace where they would produce poor results.
We'll be watching Indie dot VC closely as the program progresses. Hopefully other investors will look into this model as well and we'll start to see a new type of business. Specifically, ones with awesome and creative culture that were built to last.