Venture capital investors are the lifeblood of any startup ecosystem. They back innovation, bet on unproven ideas, and support founders to scale at breakneck pace. But despite their critical role, VCs often receive strong criticism. Why?
Jaitra Narkar, a young investor at 2am VC firm, recently unbundled the reasons for animosity towards VCs and why, despite the flak, they keep coming back for more.
‘No’ more than ‘Yes’
Imagine pouring your heart and sweat into an idea only to find rejection after rejection. That’s true for most entrepreneurs. VCs get hundreds and sometimes even thousands of startup pitches in a year, but only a handful get heard and funded.
“Most founders hear rejection dozens of times before getting a term sheet. Even great businesses don’t always fit a fund’s thesis or timing. Plus, conviction is highly subjective,” said Narkar.
“Growth or Die” Mentality
Most VC-funded ventures don’t have the luxury to grow slowly and organically. The pressure to scale quickly – sometimes at any cost – can become ruthless. But the truth is that VC money may not be patient capital; rather, it is meant for rapid scale-up.
In Narkar’s words, “Many founders resent this, but VC exists to build something in a decade that would otherwise take multiple decades. Unfortunately, there is no escaping the hard reality.”
For startup founders, this may get a bit overwhelming. However, if done in the right way, they can achieve growth that would otherwise take a lifetime.
They ghost founders
VCs do not respond – this is among the biggest complaints about VCs. While some genuinely forget, others take a number of meetings only to vanish without a response. This often frustrates founders who want to understand what went wrong during the meeting.
“Managing deal flow is hard. Some genuinely forget. Others ghost founders after multiple calls. Either way, it creates resentment,” said Narkar. While a number of VCs genuinely focus on transparency and providing feedback in a time-bound manner, managing the deal flow is no easy.
The power dynamics
In the beginning, startups chase investors to secure capital, only to be met with skepticism. However, when a startup sees growth and traction, the tables turn, and investors compete with each other to fund that startup.
Narkar said that regardless of the outcome, VCs should add value and be transparent, which means that genuine investors offer value from the first day instead of showing up when the business is doing well.
VCs have a job to do
At the end of the day, VCs’ job is to ensure returns to their investors (limited partners) on investments made in startups. Hence, every deal they make must have financial sense. This means that even if investors like a founder and his or her work or vision, they might still not invest if the numbers don’t add up.
“VCs may believe in a founder but pass if the opportunity isn’t big enough for LP returns. Every decision weighs returns, conviction, and belief in the team,” said Narkar.
So, why do VCs keep doing it?
Despite the criticism, most VCs may not trade what they do for anything. As Narkar puts it, “For me, it’s about the stories, the energy, and the chance to be part of a founder’s journey—that’s why I love what I do! Super grateful. Most VCs do this job for similar reasons – founders’ energy is always infectious.”