The Case for Saying No to Venture Capital

Andreessen Horowitz is opening an early acceptance window for its speedrun program over the coming weeks, before the main application cycle begins in the fall. Founders interested in applying should submit referrals to sr-team@a16z.com, with the strongest introductions coming from trusted sources within the investor network.

When reviewing applications for a previous speedrun cohort, the a16z speedrun team posed a question to its investors: what advice would you give a close friend or family member considering raising venture capital? The responses revealed a surprising pattern—even professional investors sometimes counsel people they care about to avoid VC altogether.

Troy Kirwin, part of the speedrun team, described a conversation with a friend running a profitable growth marketing agency generating roughly a million dollars annually in cash. Despite his role identifying companies to fund, Kirwin's counsel was direct:

I have a great friend who's running a growth marketing agency. He's reading all these blogs and wondering if he should be raising. My answer to him is: you have a great, profitable business pumping a million in cash each year, and you're working with great people. You have your own family and you get to spend time with them. Venture capital is not for everyone.

Troy Kirwin

While venture funding can accelerate growth for the right companies, experienced investors recognize that VC is fundamentally mismatched with certain business models. The question becomes: how do you determine whether venture capital aligns with your goals?

Understanding What Venture Capital Actually Is

In January 2019, Josh Kopelman, co-founder of First Round Capital and an early backer of Uber, offered a memorable analogy for the product venture capitalists provide:

Motorcycles are common (2018: Honda sold 18M motorcycles). Jet planes are rare (2018: 806 Boeing planes). VCs sell jet fuel, which doesn't work in motorcycles. Bad stuff happens if VCs push jet fuel on a bike owner. Or if a bike owner thinks they can fly.

Josh Kopelman

Kopelman later simplified the metaphor for the New York Times: "I sell jet fuel, and some people don't want to build a jet." A profitable business generating steady cash flow resembles a well-functioning motorcycle—filling it with venture capital's growth imperatives can destroy it.

Eric Paley, managing partner at seed-stage firm Founder Collective, extended this thinking with another hardware metaphor:

Founders need to think of venture capital as a power tool — a fairly dangerous one — but instead often mistake it for some magical, infinitely renewable resource. In the right hands, power tools can solve some real problems. Used incorrectly, they can chop off your hands.

Eric Paley

The Structural Commitments That Come With VC

Fareed Mosavat from the a16z speedrun team recommends that prospective founders ask themselves two sequential questions: "Should I start a company and should I raise capital for this company?" The second question, he notes, is where many founders stumble.

You are signing up for a very specific kind of company the minute you raise any capital. Are you sure you want to be signed up for that?

Fareed Mosavat

What exactly does that commitment entail? Paul Graham articulated the mechanics two decades ago:

Younger would-be founders are often surprised that investors expect them either to sell the company or go public. The reason is that investors need to get their capital back. They'll only consider companies that have an exit strategy—meaning companies that could get bought or go public.

Paul Graham

Beyond the exit requirement, venture-backed companies face pressure to demonstrate rapid growth. Those with slower expansion timelines or smaller addressable markets struggle to secure subsequent funding rounds, creating a treadmill effect.

Why Founders Raise When They Don't Need To

Emily Bennett observed that ego often plays a role in the decision to pursue venture funding, particularly among younger founders:

There's an ego element to VC, especially for young founders who think, 'I need VC to show up credibly in a room.' There are a lot of businesses that actually don't need that form of acceleration. The expectation is you're growing at a certain rate. The expectation is that you can meet this type of market demand, so it is a different kind of structural environment, which isn't for every kind of business.

Emily Bennett

Mailchimp stands as a counterexample to the perceived necessity of venture funding for credibility. Founder Ben Chestnut bootstrapped the company to approximately $700 million in annual revenue before selling it to Intuit for roughly $12 billion—without accepting outside investment.

Today, I have two constituents to worry about: customers and employees… To have a third called investors? No, I can't do that.

Ben Chestnut

The Changing Economics of Building

The macro-economic landscape is shifting the calculus around capital requirements. Mosavat notes that technological advances have fundamentally altered what's possible without external funding:

Now more than ever… you can do more as a small team. You can do more without capital. If you were trying to start almost any company a decade ago, unless you had a bunch of money to self-fund, you probably needed cash just to put a server in the closet. That's not the case now.

Fareed Mosavat

Recent examples underscore this shift. Midjourney has rejected investor capital since 2021, with venture capitalists reportedly "practically begging" founder David Holz to accept funding while he built a nine-figure revenue business with roughly 40 employees. Sam Altman, despite his extensive fundraising experience, told Alexis Ohanian:

In my little group chat with my tech CEO friends there's this betting pool for the first year that there is a one-person billion-dollar company. Which would have been unimaginable without AI and now will happen.

Sam Altman

If a single person can build a billion-dollar company, the question "do I need $5 million and a board to find out?" warrants serious consideration before circulating a pitch deck.

The Real Filter

Honest conversations with investors can serve as a useful filter. If a straightforward discussion about the realities of venture capital discourages you from raising, the product likely wasn't suited to the venture model in the first place. But for founders confident they're building the right kind of company and understand the trade-offs involved, the speedrun program remains open for applications.