Why is raising money from VCs worn as a badge of honour?

It's not really the same as a loan - you don't pay it back with cash, it's paid for upfront with a chunk of equity (usually). And if the company fails, the investors take a bath & you aren't personally liable for it. Not fun but it happens all the time.

Why is it celebrated? Because A) the company suddenly has more capital in their bank account to grow the business and B) they have someone with connections and power who has a vested interest in the business succeeding, both of which improve the long-term likelihood of success/profit (in theory at least).

PS: many people do celebrate and post about it when they get a home loan, it's an exciting thing! Debt is a tool, it's not inherently shameful.

I never saw it as a badge of honour. I am 1000x more impressed by companies that are bootstrapped from nothing into successful businesses. The founders of those companies are real entrepreneurs. The PowerPoint slinging guys getting VC funding and then loosing it all are not entrepreneurs. They are something else entirely.

It is validation that (in theory) someone has peeked behind the curtain and done some due diligence on the startup and put money on the line as a bet that the company has a chance to be a success. Compare that to some other startup that was unable to get any investors.

That said, I would rather be a bootstrapped startup with revenue than one that raised a lot of money.

You don't have to pay it back but you do give up equity.

It depends on the deal you strike. Mark Zuckerberg still controls Facebook even though it is a public company despite selling a bit here or there if he wants cash, borrowing against the shares, etc.

Other founders lose control of the company at an early stage. Many people would be delighted to get $5-50M worth of stock in a quality public company and be free to do something else with their life.

VC and accelerators offer benefits by association. For instance I worked at a startup that used space at an accelerator for B2B software startups close to Union Square in New York City. It was energizing to be surrounded by people who are thinking about both the software development and marketing aspects of the business, there is the network of the people who run the accelerator and brand name which helps with finding customers, hiring. You can walk out of that office and hike (or take the subway or a car) to meetings with mega finance, media, consumer brands, you name it.

To answer the last question: all companies are in competitive markets. For example - if you can get customers for your saas product at a cost of $25,000 per customer and that customer is worth $100,000 to your business over the lifetime, and you can acquire 10,000 of them over the next 18 months - you probably should take all the money required and go get them.

If you don't, some other company with a similar product will.

To be clear though - most companies do exactly as you are saying. You just never hear much from them unless you are their target market.

VC exists because having an idea isn't enough. If you're one developer, working nights and weekends on your idea, the barrier to compete with you is low. If you get VC money, you can immediately put several fulltime developers on the project, and the barrier to compete with you is higher.

It's not a badge of honor, it's the only way to even enter the market.

It is a welcome party to say you are now part of the capital markets. Now there is a ticking time bomb for you to make the investor class more rich.

My friend once said he didn't want to listen to pundits talking about the future (outcome of an election, how the economy is going, etc, etc) unless they were willing to put money on the line.

With VC money, someone is willing to put money on the line when it comes to believing in your success.

"Someone didn't just give me a recommendation, they bet on me!"

1. Validation from brands/people considered to know what they're doing

2. $$ to grow business

3. Founders sometimes gets to take money off the table (example: Clubhouse founders made millions in their seed round)

4. Easier to hire talent because your name gets out: techcrunch, crunchbase, topstartups.io

What else can most of these start ups claim? They would usually all have low user base, high “growth” (from a low base), low/non-existent revenue, not listed on the share market, forget about profit. Everyone wants to make themselves look better

It's a marketing tool. It is like saying, "All these smart people believe in our growth potential. You as a potential employee too should believe us. You as a customer should think we have innovative solution to your needs"

Also same reason when a large institutional investor picks up a large number of shares of your favourite growth stock and the price pops. It signals to the market that there is confidence in that company.

It helps a lot with recruiting. For an engineer with a choice of where to work and with disparate total compensation across companies, they may be more likely to choose a company that can maximize potential total comp, and a startup with VC funding increases their chances of winning that IPO lottery ticket.

Also, it is not quite a loan or debt, what happens is you are exchanging your equity for a money infusion to help you grow. If the startup fails, no money has to be repaid, the VC firm loses money. But if the startup succeeds, you succeed, but so does the VC, it becomes a win-win for both parties.

Most well off people can get a loan to buy a house. A very tiny number can raise significant amounts of venture funding. This is why it is a badge of honor.

> Somehow when folks take a large loan and buy a house which they can't really afford, usually they don't shout about it on social media forums.

But they do shout about it to the seller of the house. This is the same situation but instead of advertising to a seller that I can afford your house, you're advertising to employees that you won't go bankrupt in a few months.

Money is power and now you have some external validation and can afford some nice things.

Lots of things are badges of honor to various groups of people.

its not; or rather, it’s celebrated by the press as orchestrated by the founder because media is a key tool to influence how the world perceives them

Maybe it is the five percent fee (finder's fee or commission) for raising the money. Receiving five percent of a few million dollars isn't a bad day and would make just about anyone proud.

I agree with your question.

It's not "raised".

It's chunk of business sold and chunk of control lost and now business got a bunch of new bosses who will dictate what and how things are done.

No glory.