Raising capital is a war zone these days. You could just about walk into a room, have your big vision, and walk out with a check ten years ago. The venture capitalists were all but throwing money at you, sometimes with more enthusiasm than they should have. Those days? Long gone. Today, the landscape of venture is full of predatory deals whose very purpose is to entrap founders and strip away control, thus forcing you to haggle and give up a lot more than equity. If you are still at the helm, driving the vision of your company, then the stakes can’t get any higher; you fight not just for survival but for the soul of your business.
How Things Changed
Raising money a decade ago felt less transactional, even like a partnership of founders and investors. There was a mutual belief in the vision, and the terms were founder-friendly. VCs were more patient and gave room to the founders to breathe, make mistakes, and pivot if necessary. It was a time when, quite frankly, the relationship between capital and founder was a lot less exploitative.
But now? Predatory clauses are hiding in every term sheet, dressed up as “standard practice”. And deals are crafted for the benefit of the investor, period. They covet control, not just returns. Offers come out of nowhere, and way too many founders walk right into these traps with their eyes shut. Here’s what you’re up against today:
- Preferred Liquidation: These days, the VCs increasingly insist on getting their money out first — often several times over — before you see a cent from an exit.
- Board Control: VCs push for more seats at the table so that they can have a say in decisions you should be making. Suddenly, your vision is subject to someone else’s agenda.
- Anti-dilution clauses: While meant to be a protection for investors down the rounds, in actuality, these dilute your ownership, leaving you with less of the company you have built.
Let me be clear: they aren’t just giving you money anymore, they are buying control. For the founder highly connected with their company’s mission, this is no longer frustrating — it’s existential.
The Predatory Nature of Today’s Deals
Here’s the reality: Venture capitalists today just want to take advantage of your vulnerability. They know you need the funding to scale, but the terms they extend are about leverage, not building a partnership. The greatest danger lies in how so many of these clauses sound harmless at first, until one day — maybe even after months of negotiations — you find yourself giving away real power, bit by bit, in a company that no longer feels like yours.
Take WeWork for example. The ambitious vision promoted by Adam Neumann was swiftly hijacked by poor governance and the loss of control. The $9.5 billion bailout of WeWork by SoftBank had some very serious strings attached, which includes board control — forcing Neumann out of his own company. Neumann lost the reins while SoftBank focused on minimizing losses by restructuring the business in a way no longer aligned with his original vision.
Another example is Snap (Snapchat). When Snap went public in 2017, it offered shares with no voting rights — a first, which gave CEO Evan Spiegel and his co-founder Bobby Murphy total control over the company, even as public shareholders poured in billions. A deal like this works when a founder retains control, but imagine the reverse — founders with less savvy could find themselves cornered by investors who seek to turn this setup in their favor.
These examples prove that the consequences can be extensive once founders lose control of their firms due to predatory deals. For instance, the consequences of losing control stung the founders who drove WeWork hard, while Snap’s decision to issue non-voting shares was bold and risky. Web3 founders are equally challenged by predatory VC deals that compromise control, but Ascendant Finance is designed to help them stay focused by streamlining payment processing, security audits, and affiliate tracking. Equipped with these tools, startups can negotiate better terms and raise funds without giving in to heavy compromises in vision or autonomy.
How to Win the Battle for Control
Here’s how you can protect yourself if you’re still involved in the day-to-day operations and decisions of your company:
- Negotiate relentlessly: Every clause in a term sheet is negotiable. Don’t get rushed into signing something that will haunt you later on. Push back on control-grabbing terms — board seats, liquidation preferences, and anti-dilution clauses. They are not as “standard” as VCs would have you believe.
- Vet Your Investors: Relationships matter. Align yourself with investors who believe in your mission, not just your revenue projections. That goes both ways, avoiding those looking to exploit your need for capital.
- Look for Alternatives: You don’t always have to go for the more conventional VCs. Consider bootstrapping a bit longer, revenue-based financing, or even angel investors that better fit your values.
Survival of the Bold
Today, raising capital isn’t about raising money; it’s about mission protection. The VC landscape is booby-trapped, with wires that can yank your company in directions you never intended, while investors make decisions that could delegitimize your vision. This isn’t the time to play it unnecessarily safely. Be bold in negotiations, and only take funding on your terms — not theirs.
In today’s venture world, you’re fighting not just for capital but for your company’s future. And that’s a battle you need to win.
Paraea is an analyst with a rich background in finance, having worked at various research firms where he gained deep insights into investments and corporate strategies. Now, he blends this expertise with a unique perspective, crafting content for those venturing in finance, tech, or crypto. For more information check out ascendant.finance or join the Discord.
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