VC Cash Is Not a Training Budget

When working with early stage startups, I’ve had the privilege and pleasure of engaging with highly motivated and talented individuals creating new ventures. The title of “founder” has always carried weight: the concept of creating something of value, that may directly or indirectly create work, jobs, purpose and prosperity for others as well as the founding team.

But early on, the meaning of founder, and the motivation behind being one, is important to understand. It will influence how the company evolves over time, and the role that the original founders may have in the business as it grows and transforms.

The four Fs

Generally, founders have varying degrees of motivation across what might be called the “four Fs”: fun, fame, fortune, or fix.

Some founders are doing this because it is more enjoyable, more fun, than working within someone else’s organisation. There is more freedom to operate, more autonomy, more scope for creativity.

Some are looking for fame, with ego a significant factor in their motivation.

Many are motivated by fortune, having seen a small proportion of founders achieve life-changing financial independence.

And many are looking to fix things that they perceive to be broken: solving unsolved problems, or making the world slightly better for the greater good. This last category also stretches to encompass “fairness” and “future”: what do the founders want to leave behind as a legacy?

There are also factors rooted in the founders’ early years, and their varying need for recognition, power over others, or control over their own environment. These are not independent of their “four Fs” motivation, and are often tightly linked. Whether consciously aware of it or not, many founders are looking to prove their parents, family, teachers, or childhood peers wrong - or right.

The dark triad

There is also the need to consider the “dark triad” that is normally present in apparently successful founders: narcissism, machiavellianism, and psychopathy. These are nuanced traits that in excess are considered negative in society, for good reason. But in small amounts, they may be beneficial or even essential for success. Without “just enough” of these traits, founders may not have the grit, persistence, or ingenuity to survive and thrive in complex, hostile competitive environments.

The point in these diversions into psychology is that these factors are all very relevant as a startup grows, particularly if accelerated by VC (or PE, angel, or other) investment. The addition of external financial capital, particularly in 2025, now comes with much more than cash to scale the business. Investors have their own agendas and target outcomes in mind, views on what a startup does and how it operates, and views on who is best placed to continue to drive the business as it grows.

The stages of growth

It is well understood that the mindset needed at each stage of growth is quite different. Using the typical VC investment stages as one framework:

Pre-seed. The founders have an idea, that is pre-revenue and usually pre-product. The motivation and prior success of the founding team is the most important aspect: what is their founder/market fit, previous experience and evidence of success, tenacity, drive, and ability to realise their goals? The purpose of pre-seed investment is to assemble the right team, and prove their initial hypotheses and assumptions for the problem being solved, the value of the market, and the likely GTM strategy.

Seed. Basic validation of the founders’ goals and ideas has been realised, usually in some form of working prototype or proof of concept. The goal of seed funding is to enable the founders and the initial team to create the first version of their product or service, to hopefully generate real revenue from customers.

Series A. With early product/market fit now proven by generation of revenue for products or services that customers want to pay for (nothing is real until customers spend money), the company will typically use Series A funding to scale the business. This means building out an efficient and effective operating model and GTM function, usually in its target market, which most commonly is domestic. We talk about the timing and need for international expansion in when to expand internationally.

Series B. Having created a viable business that has been successful so far, expansion through international growth, product diversification, or adjacent market entry can be accelerated through additional capital injection. Other uses for Series B funding can include expansion of sales capacity, infrastructure, or hiring a larger team.

Series C and beyond. Further investment at this stage is typically used for continued growth and acceleration, or to explore strategic partnerships. The uses are varied, and could include pre-IPO positioning, or perhaps acquiring other businesses.

The point here is that although many companies today do not need to follow these traditional funding rounds, the stages that any startup company goes through are nearly universally the same. That said, these stages are not mandatory - with many startups now skipping stages, using alternate structures such as bridge funding, debt financing, or use revenue-based financing.

The key question

The key question, exemplified by VCs who place a bet by investing their LPs’ money into the venture, is this: do we have the right skills, capabilities and experience onboard to maximise the chance of continued success?

Where friction and issues most often arise, when startups use VC cash for accelerated expansion, is where there is a lack of honest self-reflection about the founders’ motivation, capabilities, skills and experience. The very traits that enabled their early success (self-conviction, ego, ability to operate in very resource-constrained environments) are most likely not the traits needed for future stages of growth. VCs understand this. First-time founders are less likely to.

Another way to frame this is to reflect on the motivation for the specific round of investment being made: is the investment in the founders as individuals, or in the value proposition of the company, which may now be a legally separate, viable concern? It is common to see early stage founders not appreciate that their skills and experience may be inadequate for the next stage of growth. They also tend to feel a strong sense of self-identification with the venture they have created, which makes objective assessment harder.

Fired, flourish, or flee

The choices at these step changes in operation require honest self-reflection, ideally done with external, objective assessment. Will training, coaching, mentoring and board involvement give the founders everything needed to grow into their new roles, or are their motivations and capabilities fundamentally inadequate for the next stage? These considerations may or may not have been part of the thinking at OpenAI in 2023, as we briefly unpacked in how not to fire your founder.

Putting it differently, founders should ask themselves early: how do they see themselves exiting their own business operationally? Will they be fired, flourish, or flee? (More Fs.)

Regardless of the path taken, a founder will always be a founder. Is it better to own equity and look back on success, even if the later stages involved input, or perhaps replacements, more able to drive the business forward, than to insist on remaining in the driving seat of a business that fails as a result?

The training budget problem

Founders may think that they can go the distance to IPO or sale of the business, or remain at the helm indefinitely. But if they are using VC funding as a training budget for themselves to learn on the job, it would be wise to consider the implications of that thoughtfully, and invest in self-discovery along the way.

VC cash is not a training budget. It is capital deployed with the expectation of returns. Founders who recognise the difference, and who have the self-awareness to seek the right support at the right time, are far more likely to build something that lasts.