On dis­cussing why he and his co-founders are seek­ing ven­ture cap­i­tal fund­ing for their pro­gram­ming ques­tion and answer site (Stack­Over­flow), Joel Spol­sky pro­vides a num­ber of sce­nar­ios for when a com­pany should give con­sid­er­a­tion to VC fund­ing:

  1. There’s a land grab going on.
  2. There is a prov­able con­cept that’s repeatable.
  3. The busi­ness could ben­e­fit from the pub­lic­ity of get­ting an invest­ment from some­one who is thought of as being a savvy investor.
  4. The investor will add sub­stan­tial value to the busi­ness in advice, con­nec­tions, and introductions.
  5. The busi­ness can poten­tially have a big exit or become a large, pub­li­cally traded company.
  6. The founders are happy to give up some con­trol to make the busi­ness more successful.

And when a com­pany should not con­sider it:

  1. The founders are risk-averse and are will­ing to trade a much smaller pay­out for lower risk.
  2. The founders are tech­ni­cal with­out sub­stan­tial busi­ness expe­ri­ence and wish to main­tain absolute con­trol forever.
  3. If the investor is mostly “dumb money.”
  4. If you’re going into an estab­lished field with a lot of competition.
  5. If the prod­uct is imma­ture and unproven.
  6. If the founders don’t have enough of the right kinds of indus­try con­nec­tions, or the idea is not com­pelling enough, so that rais­ing VC would take months or years
  7. If there is any other way to raise the kind of money you need.

A num­ber of pieces have been writ­ten dis­agree­ing with Spolsky’s arti­cle, sug­gest­ing that either Stack­Over­flow does not fit these cri­te­ria or that the rea­son­ing is just plain wrong. 37signals’ post cov­ers both.