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Venture Capital and your Blogging Business

There’s a good post over at Whitespace titled Boom 2.0 which talks a little of the struggle of the 9rules guys to work out whether they wanted to accept venture capital funding.

“Last week we were offered a “generous” sum of money to fund some of the projects that we wished to work on. Initially, we jumped all over the offer for the simple reason that we continue to tell ourselves that if we could get away from doing client work for a couple of weeks/months then we could dedicate 100% of our time to the stuff we really want to do. After some time though and a lot of discussion we decided to turn down the money mainly because the offer didn’t feel right to us. I wish I could say it was an easy decision to make.”

Being approached by someone who wants to inject big dollars into your blogging business is a pretty amazing journey. I’ve had approaches from a number of VC people over the past 18 months and the feelings that come along with it are a real roller coaster ride.

You go from feeling totally exhilarated by the number of 000′s being mentioned – to totally freaked out by the size of it all – to a depressing realization of what the money will cost you (no one ever gives you money without some strings) – to feeling invincible as you consider the size of what you could build – to feeling that you could greedily build your own empire without having to give anyone else a share, to feeling convicted that money isn’t everything… etc etc etc

In each case that I’ve been through I’d given some serious thought to the idea but on each occasion I too, like the 9rules team, that things were not quite right.

On one occasion the VC guy needed an answer ‘now’ (here’s a hot tip – if someone insists on a ‘now’ decision, warning bells should be going off in your mind – why do they need a decision ‘now’? More often or not its because they know you can get a better deal elsewhere). On another occasion I would almost literally have been selling my soul for many years for the money. On another one I just didn’t feel right about the people behind the deal having looked over some of the other projects that they’d funded.

I’m not anti VC. I know some bloggers are totally against it on principle – but I see that there can be times and places where investment can be very appropriate. Having said this – I’m a pretty picky and choosey kind of guy and would only enter into this type of deal if everything lined up well. One of the dangers of going down the VC path can be that you put your blogging business on hold while you negotiate the deal and get bogged down in contracts and logistics. I know of a few small-business owners who have become quite obsessed with VC – to the point where the businesses that they were trying to get funded suffered.

My approach is to keep building what I’ve been working on as if VC will never be an option. If opportunities arise – each are evaluated on an individual basis. The deal needs to be ‘right’. If it’s not it is business as usual.

Of course I now have the luxury of being able to reject offers that are not ‘right’ because I’ve built things to a point where it provides a decent income – however as I look at the first VC deal I was offered – I’m so glad that I knocked it back as I’ve managed to build things well past what their best ‘now’ offer was.

I’m interested in others thoughts on the topic. I’m by no means a financial wiz – but what advice would you give someone looking at a VC deal?

About Darren Rowse

Darren Rowse is the founder and editor of ProBlogger Blog Tips and Digital Photography School. Learn more about him here and connect with him on Twitter, Facebook, Google+ and LinkedIn.

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Comments

  1. Stuart says:

    I think I would be telling them pretty much what you’ve already said.

    Don’t look at the bottom line where the dollars are mentioned – look at the one above it that tells you what you’re going to have to do in return for that money.

    I guess 30 pieces of silver seemed like a good deal for one guy but look where it got him.

  2. Dan says:

    What? Standed on an island with pirates? Who gives silver as venture capital? Am i missing something? Hehe!

  3. Athomemama says:

    I like the 30 pcs of silver comment, Stuart. Seems like VC is often compared to selling your soul to the devil…

  4. Be very wary of it. They are not concerned about anything other than the next quarter’s earnings…

  5. HostingDiary says:

    I’m curious to know how external funding might be spent on an established blog to achieve an acceptable ROI for the VC’s.
    What exactly would you do with the cash?

    Andrew

  6. Brent says:

    I guess I missed that day at bible school and I had to look it up on Google, but for everyone else who does not know 30 pcs of silver was the coinage with which Judas was paid for the betrayal of Christ in the bible.

  7. Darren Rowse says:

    Hosting Diary – money could be used on a variety of fronts. But really it would probably go towards expanding things, paying authors, professional design – even PR and advertising. But overall I’d spend it on content development – the key to any good blog network.

  8. Darren Rowse says:

    you’re right Brent – we run quite the biblical blog here ;-)

  9. Broke says:

    I think the big question to ask is what do you want out of your business at the end of the day.
    When you take someone elses money you lose part of the control, and if/when things start to grow at a rate that you hadn’t predicted you may find yourself in a position you never imagined or wanted to be in the first place.

  10. I’d recommend an excellent book I reviewed back in July called, “Bootstrapping Your Business”. Here’s the review.

  11. Dave says:

    Any sacrifice over the control of your work has to be considered carefully – like its has been stated, the VC’s want some return on their investment, which puts you under more pressure to perform and expand to deadlines that you wouldn’t otherwise face.

    A big part of me says that if ypu’ve stepped away from a corporate environment to work for yourself, why would you want to take a step back and have to become answerable to a third party.

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