For every entrepreneur who says you don't need VC money, I can find you one who is equally convinced of the opposite. The biggest successes in technology have been venture-backed. That's the point of VC - to allow successful companies to scale up and have a shot at being super-successful.
I agree and I believe I am one of those who thinks one thing and do another. I have had my own share of bad experience with VC's but I tried very hard not to demonize and tried to learn from my past. Perhaps using an analogy that I have seen in one of the YC posts, thinking that I could an astronaut one day doesn't mean that I actually want to go to the moon, but it gives me the motivation and the endurance to just get across town.
A lot of entrepreneurs can become disenchanted and unrealistic in expectations. I have seen quite a few presentations from entrepreneurs, and they are typically all over the place. Many lose focus, and do a bunch of things that essentially don't matter. Having an experienced set of eyes with a vested interest in the success of your start-up makes for an honest reality check. Also, it helps you get through the rough patches.
http://johnndege.com/2008/03/31/startup-advice-from-someone-...
The amount of funding VC's provide depends on where your startup is, what you need, what you want to do with it. Series A financing is meant to prove your concept, maybe test out a business model, maybe get some users. With internet and software, a couple hundred thousand should get you to that point. Other types of startups (medical devices, hardware, biotech) are more capital intensive, and need more money to build a prototype and prove out the concept. VCs are evolving and some are funding at similar levels to angels. Look at Founders Fund and Charles River Ventures as examples.
No one is going to just hand you money and hope you do the right thing. VC's are in business to make money and fantastic returns. There are startups that work really well with VC funding, and startups that are better off staying bootstrapped. I could get into more detail, but the basic idea is that if you're not ready to grow at a hair losing pace over the next 3-5 years, don't take VC money.
The alternatives do not seem well thought out in this article. Friend and family money and mortgaging your house are not really direct substitutes for VC's. Friends, family, fools are sources of initial funding, before you have anything tangible. Mortgaging your house gives you cash in exchange for additional personal debt, which is typically not the right type of financing for startups. VC's and angels use equity investments, which means that if your business fails, you're basically off the hook. Taking on debt means that you owe that money whether your startup succeeds or fails. Not using expensive software, outsourcing design work, using your house as an office, bringing other developers are ways of cutting initial costs, but there are still unavoidable costs to growing businesses. There is a cost to getting talented employees, support equipment, and sales people. Not every startup can rely on viral growth and word of mouth to get new customers.
I have seen too many entrepreneurs that blow $100k - $400k building and doing "cool, shiny" things that don't matter, and start running out of money, without showing any real traction or evidence that it can become a viable business. Involving an experienced outsider to identify essential features, actions, partnerships could easily mean the difference between success and failure.
