rafat.org

1) VC money is not evil. 2) VC money is not sustainable.

Those are not contradictory statements.

Venture money in media has its place, especially to help start up a media venture. It also has a place on the growth equity side, after a company reaches certain size and profitability, to build inorganic growth (acquisitions, moonshots etc).

Too much venture money in hope of outsized returns and what it leads media companies to chase, that is the problem.

Don’t blame investors for investing, that is their job. The only job founders/companies have, meanwhile, is to build a sustainable, long term business. “High growth at all costs” is NOT a necessary condition to it, merely a causation founders have backed themselves into if they raise too much money.

At all times, there is a delta between what is needed to grow a company according to the founders vision and what the investors want. There is always a delta. In ideal times, that delta is as small as possible, but when that delta becomes too big, that’s when it becomes a problem. That delta is the hole over-invested media companies dug themselves into, by over-promising.

That is the right lens to look at ALL the news about digital media companies this week. Everything else being discussed is just noise.

Photo credit: denisbin via Visual Hunt/CC BY-ND