For Founders, Venture Capital is a Trade-off, Not a Triumph

The following article was written by Chris Sell, cofounder of GrowthLoop and entrepreneur-in-residence at the Polsky Center, and originally published in Crain’s Chicago Business on March 23, 2026. 

For first-time founders, raising venture capital has become synonymous with success. Raising money means more than just securing cash to fuel a business. It has come to mean validation, signaling, and prestige. However, being cast under this spell is costing founders and their teams in real economic terms. 

The first-time founders I speak with focus on what companies gain with venture financing. They talk about capital, high valuations, and connections. To them, it feels like these companies are obtaining certain success.

And while there are many positives to venture, I like to take the opposite approach to break the spell: what do founders lose when they raise venture financing? This is something that repeat founders know well, but is often useful for first time founders to know earlier in their journey. 

First, let’s talk about what founders lose when they raise their first dollar from a venture firm or angel. Imagine over the next ten years a founder creates a business doing $5 million in revenue at a twenty five percent margin. At year end, they and their co-founder look at each other and decide to write themselves a $500,000 dividend check. Sounds pretty good, right? As soon as a founder raises venture capital, this option is off the table. Dividends are discouraged in the venture model as all capital should be used for growth.

Second, let’s discuss what founders lose when they raise their first equity priced round, typically called a Seed or Series A. Imagine that same founder gets an offer to sell for $25 million. They decide that taking the offer is the best move for their family as it will be life changing. Again, this sounds amazing, right? Well, founders typically give this option up too in their first priced equity round if they aren’t strategic. In Q3 2025, the average Seed valuation was $19.8 million, and the average Series A was $60 million, according to Carta. Venture investors typically want startups to achieve at least five to ten times their invested valuation. And since they receive veto rights over any sale of the company, a $25 million acquisition is often off the table as it doesn’t hit the targeted return.

When Hernán Cortes landed in Mexico, legend has it that he burned the boats so there was no option to go back to Spain. I tell founders when they raise venture financing, they are burning the boats. They are reducing their options. The only path is forward and driving growth as fast as possible toward a strategic acquisition or potential IPO. There is no going back to Spain.

Venture funding has enabled generational companies to grow incredibly quickly, but it also costs founders certain options. Experienced founders often understand this from learning the hard way. For first-time founders, these options often slip away silently. 

That is why first-time founders should view venture capital as one tool among many to grow a company. They need to educate themselves on venture financing terms before taking a dollar. Founders should look at venture capital not as assured success for a startup, but as a tradeoff of options. Founders must analyze which of those options are best for their wellbeing, their family, and their employees. Then, and only then, they can look clear-eyed in the mirror, and make the best decision.