Answer by Jason M. Lemkin, Managing Director @ Storm Ventures. Co-founder/CEO at EchoSign (acq'd by Adobe), NanoGram Devices, on Quora,

I've thought a lot more about this recently working with more cash-efficient start-ups. Start-ups with lots of options. My experiences as a founder with 150+ VCs was overall positive, but decidedly mixed.

But ...

I've come to the conclusion that done right--there are no drawbacks. If done right.

Let me explain. Basically there are 2 types of start-ups. Those that require VC capital to make it. And those that don't, but want VC capital to grow faster.

The first category--the No Choice category--well as a CEO, march forward son. You need the money. You have no choice. Your job is to pick the best date to the dance. If you only get one Yes ... you know who to take. Your job is to get more than one option, and then pick the date that is a better fit for you. [Which if you are early stage, may well be more about fit and goals and help than maximum valuation. Later, it will almost 100% be solely about valuation.]

The second category--Could Take VC Money But Don't Need It--works itself out. If you're Hot, Growing 100-200% YoY post-Initial Traction, cash-flow positive ... the VCs know they have to give you basically whatever you want. Zero control. Secondary liquidity. Whatever it takes. So that works itself out, too. All these VCs will want is their target % ownership for a price they can afford / justify.

What you have to make sure as a founder is that you understand which category you are in, and that if you have options ... you pick the right partner.

The rest controls for itself. Even optionality, M&A, etc.

Your job as CEO is to create options.

If you have none, then, well ... you know how that goes.

[Ok I know others will disagree, even me in some ways at an anecdotal level. But I think the reality is picking the best partner, and having that partner know you have options--solves so many VC issues.]

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Published on: Nov 27, 2014