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The Sim City model of growing a company. Screw VC money

Danny Sullivan, founding editor of Search Engine Land details how his companies have never used VC money in an article about the unexpected and sad end of GigaOm, which closed suddenly after it ran out of money. If you grow organically, don’t get over-extended or have a crushing debt load, then your business can survive bumps and bad times without funding or borrowing.

It’s what I once called the “SimCity” model of growing. I used to often play the game years ago. I would take two approaches. One was to use the “FUNDS” cheat to get all the money I needed to build everything at once. But in doing this, I often found my cities built that way didn’t thrive. Instead, naturally growing my city slowly over time allowed it to stabilize and do well.

There are multiple problems with VC funding. The VC might run out of money or simply stop funding you. Then what? And if they put up money, they will certainly want a say in how the company is run. Their goals are probably different from a company that wants long-term growth, as VCs generally want to go public fast so they can cash out. This may conflict with building the company.

Also, your company doesn’t have to be ginormous to do well. A solid niche can be quite profitable too.

Sometimes, it’s not an inner sigh. Sometimes, it’s public, as happened ironically last month after GigaOm published a story suggesting that even “niche” media wants to be mass. I countered that no, we didn’t — and others chimed in.

Our revenue would be worse if we had a broad audience. We produce content for digital marketers, so your typical BuzzFeed reader interested in that damn dress isn’t going to be much of value to us.

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