Consider the required company size before raising funds

Companies that have received VC funding are not necessarily superior to those that have grown by steadily building up sales. VC stands for venture capital, which are investors who fund growth companies. The point of using that money is to accept conditions such as sharing equity and challenge yourself to achieve growth that you otherwise couldn't reach without raising those funds.

If AI increases the amount of work a single person can handle, the number of people and amount of capital a company needs might also change. A solopreneur is an entrepreneur who runs a business centered around a single person. You don't have to shoulder everything alone; you can also combine outsourcing and hiring specialists.Let's rethink the sequence of gathering people and gathering money before starting.It is worth it.

What were Dorsey and a16z fighting over?

In December 2021, an exchange on Twitter (now X) between Jack Dorsey and venture capital firm a16z (Andreessen Horowitz) became a hot topic. The main point of contention was whether the owners of Web3 are truly its users. Web3, in this context, refers to an internet vision where users and developers participate in the ownership of services through tokens on a blockchain, among other things.

In September of the same year, prior to that, a16z's Chris Dixon Why Web3 Matters And so, it explained the idea of an internet owned by its users and developers. Meanwhile, Dorsey, in December, Original post And he criticized that Web3 is owned by VCs and LPs, who are investors in their funds. This is Dorsey's assessment and not a statistic confirming that the ownership structure of all Web3 businesses is the same.

Dorsey Reply to Dixon But after criticizing investment funds for aiming for a media empire, Screenshot of being blocked by Marc Andreessen even posting up to. If we summarize it as merely arguing about the general theory of whether VCs are necessary or unnecessary, we misunderstand the issues at the time.

A caricature posted by Pieter Levels succinctly illustrates that argument. Large VCs gulp down the water of "Web3," while only a few drops reach the retail investors labeled "Retail." Dorsey [viewed/referred to] this post Quote with "💯" Done. It is a painting that asks, under the banner of decentralization, who do the profits go to?

pic.twitter.com/h9DAgRRWhl

— @levelsio (@levelsio) December 21, 2021

View caricature in original post

The satirical cartoon was posted by Pieter Levels. Levels Reply introducing the author And Ercan Baysal (@3AYSAL) is credited as the original artist. The person who added text like "Web3" is not identified here. The drawing represents a critique of profit distribution and is not a document showing actual distribution ratios.

Even if technology is decentralized, ownership is not necessarily decentralized.

Sharing records across multiple computers, widely distributing profits and voting rights, and operating a business without belonging to a large corporation. These three are separate issues. According to BIS researchers 2021 DeFi Analysis It also points out that in financial services using blockchain, the rights to determine operational policies and the initial token distribution can be centralized.

Therefore, simply using blockchain does not free managers from capital. If you raise business funds by selling tokens, the method of fundraising has changed, not the need for funds. This is not a matter of treating tokens as having the same legal nature as shares, but rather an economic arrangement of receiving money from someone for a business.

Even so, it is possible to aim for an independent, decentralized way of working where small businesses cooperate as needed. What should be verified at that time, rather than buzzwords, is who holds the customers, who determines the prices, and who keeps the profits. Small companies using AI and sales platforms also need to inspect their dependence on those fees and terms of use.

Will AI increase the number of businesses that do not need VCs?

There is limited experimental evidence supporting the potential for expanding jobs that can be done by small groups. Analyzing 776 P&G professionals, Research published in 2025 So, in the assignment to come up with new product ideas, one person using AI produced ideas of comparable quality to a pair of participants not using AI. This was an experiment where participants were randomly assigned, unlike mere success stories.

However, the focus is on a one-day task performed by employees of large corporations. This research does not demonstrate that an individual can handle sales, delivery, and cash flow management alone over a long period, nor does it show that startup capital becomes unnecessary. It is also effective for teams using AI, and it cannot be interpreted to mean that "there is no longer any need to team up with people."

The management hypothesis from this point isIf we can handle the work of reaching our first paying customer with a small team, wouldn't that allow us to test more business ideas without relying on external equity?That is what it is. First, create a proposal to start small centered around one person, and compare it with the proposal to prioritize recruitment and procurement. Compare them by including not only AI usage fees, but also the costs for deliverables verification, customer support, and consulting experts.

Conversely, in businesses that require factories and inventory, have a long timeline from development to payment, or need to reach a large number of customers in a short period of time, financing needs will remain even if part of the work is left to AI. Whether or not AI can be used does not determine whether to bring in a VC.

Does inserting money change the speed of growth?

It makes sense to consider investment, for example, when sales cannot be generated unless research and development is advanced first, or when a customer acquisition system has been confirmed and increasing investment can expand the market. On the other hand, problems such as increasing advertising without verifying demand, or hiring people without being able to give them work, cannot be solved with money alone.

This is a clarification of judgment, not a pass/fail table by industry. "Organic growth" does not mean that the management continues to pour in personal assets. Self-funding, reinvestment of sales from customers, borrowing, and VC investment are considered separately. Borrowing requires repayment. Receiving investment from VC does not mean you do not have to think about cash flow.

Let's compare the option of procuring it with the option of not procuring it.

As a tentative business, we are comparing the option of selling in multiple regions from the start with the option of generating sales in a single region first and then expanding. The former requires upfront expenditures for hiring sales representatives and establishing a sales structure. The latter can be started with less capital, but expansion is slower. We will make our decision by taking into account changes in competitive conditions during that time and the costs of expanding later.

What matters is what can be verified after the funds are used. Set conditions for moving forward, such as securing a paid contract, achieving mass production, or becoming profitable in another region. Even if the funds are exhausted, if that cannot be verified, there is no guarantee that additional funding can be raised.

You do not need to lock in your choices from the founding period forever. It is also possible to start small to test demand and then seek investment, or to fund early development through investment and then support growth with sales after commercialization.

Even a profitable company can have a mismatch in exit strategies with investors.

Here is a simple hypothetical example. Suppose a venture capital firm invests 100 million yen to acquire a 20% stake, with no subsequent dilution, and the entire company is eventually sold for 300 million yen. If all shareholders receive a pro-rata distribution under the same terms, the venture capital firm's payout is 60 million yen. While this may be an attractive exit for the founder, it represents a return below the invested amount for the venture capital firm.

In reality, the allocation changes depending on preferred stock or contracts. However,Selling a company and all shareholders wanting the same sale terms are two different things.I see. The Ministry of Economy, Trade and Industry Startup M&A Guidance Furthermore, we are organizing the differences in objectives based on investor attributes and individual differences in attitudes toward M&A. Prior to investment, we confirm the scale of the exit, the handling of IPOs and M&As, the remaining life of the fund, and the terms of agreement upon exit.

For example, to receive 20% of your equity back, which equals an investment principal of 100 million yen, a total share sale of 500 million yen is required. This calculation does not account for fees, taxes, or the investment period, and it is not a benchmark indicating that investors will be satisfied if it sells for 500 million yen.

What is necessary, even if it means dividing the equity?

The value provided by VCs is not limited to funding alone. As published by the Financial Services Agency, Overview of Recommendations and Expectations for VCs in 2024 It also mentions management support such as talent recruitment, and considering exit methods and timing, including M&A. However, not all VCs guarantee the same level of support. Check who will support what, and how you will discuss matters if development is delayed or if you want to change your exit strategy.

There is also a path to make modest earnings using AI, team up with the necessary experts, and retain your equity. Another path is to receive investment and support to expand into markets you couldn't reach on your own. The criteria for decision-making areCan you drive a business forward more than by separating equity from freedom of choice?It is. Do not start from the funding announcement; instead, work backward from the business you aim to build and the subsequent IPO or M&A.