You don’t actually want venture capital.

I know that sounds strange coming from me, but hear me out. Every day, founders get blinded by the headlines of multi-million-pound raises. It’s treated as the ultimate badge of honour in business. Here’s my honest take, though:

VC funding is a high-stakes, all-or-nothing bet. And unless your company is built a very specific way, letting a VC into your boardroom is like pouring rocket fuel into a tractor engine. It won’t make you go faster; it’ll just blow you up.

A perfect example of this in action is the guy who launched Slack.

Back in 2009, Stewart Butterfield raised $17 million in venture capital to build a video game called Glitch. He hired 40 people across three cities and spent 3.5 years tweaking it. The team loved it. But almost nobody else did. By 2012, the game had completely flopped and had to shut down.

Now, in any normal business world, that is a catastrophic failure. But there’s a twist…

While building the game, the team had coded a crude, internal chat tool just to talk to each other across offices. 

When the game died, they still had $6 million of investor money left. Instead of giving it back, they pivoted, polished that chat tool, and launched it publicly. 

They called it Slack (which, chances are, your business relies on right now). Salesforce bought it a few years later for $27.7 billion.

The VCs who backed that failed video game didn't just get their money back; they won the lottery. And that tells you everything you need to know about the model.

It sounds like a dream outcome, but don't let the fairy-tale ending fool you. Slack is the 1% lottery winner - the exception that proves a very dangerous rule.

When a VC fund raises money from massive institutions, they take that cash and spread it across 20 to 50 companies.

And this is the part most first-time founders don’t fully absorb: the fund fully expects the vast majority of those businesses to go to absolute zero.

When VCs say they expect failure, they don't mean it as a tragic, worst-case scenario. They mean it as their base case: their standard, expected reality. 

They write off 90% of their portfolio as the cost of doing business. In their eyes, those failed companies are just "tuition" - the expensive price they pay to stumble upon the one or two "fund-returners" like Slack.

So, when you sit across from a VC, they aren't asking themselves, "Is this a stable, profitable business run by smart people?"

They are asking, "If every other company I invest in completely collapses into the dirt, can this single business grow so mind-blowingly large that it pays back my entire fund on its own?"

If your business can’t do that, they don’t care how safe or profitable you are. Your numbers just don't move their spreadsheet

The reason Slack worked for this model is simple: software scales essentially for free. Once you build the code, jumping from 40 users to 10 million users doesn’t require building a new factory, buying raw materials, or doubling your staff. The profit margins are nearly infinite.

Now, look at a restaurant. 

Or a construction firm. 

Or a recruitment agency.

For you to grow, you need physical things. Every new customer requires more staff, more raw materials, a bigger lease, or more hours in the day. Your growth is bound by the laws of physics.

That isn't a criticism of your business; it’s actually how a healthy, real-life economy functions. But because growth costs you money at every single step, your upside is naturally capped. No amount of brilliant management or hard work can turn a great hospitality or service company into a tech-style rocket ship.

If you try to fit a healthy, steady-growth business into a VC model, they will force you to burn cash, hire too fast, and take reckless risks to chase an impossible scale. They will push you to become a giant or die trying, because a stable, moderately profitable business is a useless metric on their spreadsheet.

If you’re running a business that makes real money, serves real customers and grows sustainably, avoiding venture capital isn't a failure. It means you’re running a real business, not a lottery ticket.

The value in knowing this early is that it stops you from wasting months pitching the wrong people. There are plenty of funding options out there - from smart debt structures to working capital facilities - that want to back reliable, profitable growth without forcing you to bet the entire company on a coin flip.

If this makes you realise you've been having the wrong funding conversations, that’s what my intention was.

Hit reply to this email, tell me what you're building, and let’s figure out the funding path that actually matches your game.

Till next time,

James