Venture capitalists will push a good business too fast to chase a giant one

John Mackey, the co-founder of Whole Foods Market, learned to be grateful for venture capital and suspicious of it at the same time. When he was asked why he calls venture capitalists “hitchhikers with credit cards,” he said their aims diverge from founders’: they ride along for part of the journey, supply cash to get the company farther, and then get out.

“Don’t give up control of your business to the VCs,” Mackey said. “They may talk a good game, but they’re not fundamentally aligned with you.”

What he means, he argued, is that venture firms run on a blockbuster model. They are looking for exponential growth like Apple, Nvidia, or Intuitive Surgical, companies that can compound and return 100 times the invested money. Their funds typically have about seven years before they must start paying back investors, he said, rather than staying invested for decades.

That clock changes their advice. Mackey said venture investors often tell a founder not to worry about losses, because another financing round will come at a higher valuation, and then another. For some businesses, he said, rapid scaling works and produces a happy ending.

But he believes many ordinary, healthy businesses are damaged in the process. A company that might never become a multibillion-dollar giant can still be good, he argued, yet pressure to grow very fast can wreck it. He said investors can afford many failures because the rare giant winners earn enough to cover the rest, like a batting average where they do not have to hit 1,000, just good enough, with home runs paying for the rest.

Mackey speaks from his own ride. He said Whole Foods did not raise much venture money, but it was enough to expand into Northern California, and four years later the company went public. Once it had public money, Mackey said, it no longer needed those backers, “and they got out of the car.”

The danger, he argued, comes later, when growth disappoints. Then a company can face a down round that sharply dilutes the founder, or the investors bring in outside managers and throw the founder out by the side of the road. Most founders want to still be building in 10, 15, or 20 years, Mackey said, while the fund wants its huge return in seven. “They’re prepared to crash your business prematurely if that’s what it takes,” he said. “So, be careful.”