Everything and Nothing: Should You Let a VC Invest in Your Seed Round?

Author:.	Elad Gil.
Source:.	http://blog. eladgil. com/2010/07/should-you-let-vc-invest-in-your-seed. html.

In the long process of raising the insanity in the form of an initial round of funding. [1 ]. Many entrepreneurs wonder: Does it make sense to involve one or more of the VC in the seed round, as part of the round (T. e. 10% buy the company, as opposed to, say, a situation where the VC buys 25 % of the company during the seed). This leads to many more compromises than one might first think, and partly pushed economies VC, which I wrote earlier.
I usually. not. advise employers include venture capital fund as a small part of their initial round of. Nevertheless, several successful companies, ' planted ' venture capital funds (for example, AdMob), and my company, Mixer Labs, have benefited from the presence of venture capital funds (Sequoia, which were very helpful ) as part of the initial round of.
All this is highly dependent on the circumstances and as an entrepreneur, you have to weigh the pros and cons of the presence of VC in your seed round when the decision.
The benefits of raising the initial round of VC:.

Do you have an investor with deep pockets. Which may, if things go well, to invest more money in a startup (but if things go well, you can raise money in any case).

Lift up fast!. VC can be deployed without a hitch is that they consider ' small ' amount of capital, for example, $ 250K-$ 500K will not affect the $ 400 million fund.

Sometimes the decision to invest a small amount of a single partner to provide. [2 ]. or two partners, compared with the entry into a transaction to all Fund.

It has a drawback: VC willing to write off that amount from the account and can not support the start-up, which they have invested little capital.

branding. Brand VC can help you to attract talent and attract potential employees.

Tips and structure. Some employers may use the infrastructure and advice from VC, provided by members of the Board (subject to the purchase of a sufficient part of the company to justify the time a partner ). Upscale angel can also meet these needs.

Disadvantages include VC in your seed round:.

' Mayachek '. This is a major drawback. When you go on raising Series A investors will wonder why you do not take money from a venture capital fund, which has already invested in your seed round.
- If the VC, who participated in the initial round, not investing in the round of Series A, other investors will view this as a big red flag - m. e. for whatever reason, VC, who knows your business inside out, do not invest money? .
- This means that your valuation on this round can be below that which could be.
- There are always ways to sail past these reefs, but it all adds to the friction, and so immersive process of raising money.

If you do not raise your money from venture capital fund,. other venture capital funds may begin to actively communicate with you.
- Investors always want to prove their value in times when you raise Series A, so they will spend time on the official presentation, meeting periodically to discuss strategy, etc.. That is, the lack of venture capital fund in your round would mean a lot of other foundations can still help you.

Venture investors are likely to stop supporting early stage company if things go wrong. and seed money from the round end.
- This is not from malice, but rather from. a calculated business decision. expressed in the evaluation of the effectiveness of partners' time. Why did your partner spend much time with the 'bad' investment when there is always available a new entrepreneur, knock at the door. The company can be more interesting for an angel who can help her, for reasons other than financial.