# The Crucial Choice: VC Track or PE Track?

*May 31, 2023*

Series A fundraising is hard at the moment. Is the VC track really the only option?

The fundraising environment for B2B SaaS companies has become increasingly difficult. While venture capital firms maintain substantial capital reserves, they've become more selective and focused on supporting existing investments or AI opportunities. Founders of post-seed companies facing stalled growth now confront a fundamental question: pursue venture-scale growth regardless of obstacles, or consider alternative paths offering meaningful outcomes?

## VC Track Defined

The venture capital approach demands rapid expansion, typically 100-200% year-over-year growth or higher. Companies pursuing this track bet that sufficient funding will unlock a new growth channel or product innovation enabling hypergrowth leading to acquisition or IPO.

## PE Track Defined

The private equity path prioritizes achieving profitability to eliminate additional fundraising needs, accepting slower linear growth ranging from 20-50% annually. This approach creates flexibility for founders to eventually sell to PE firms, operate independently, or potentially return to venture funding when conditions improve.

## Key Decision Factors

**Growth evaluation:** Honest assessment of actual growth against projections matters. Companies below 100% year-over-year growth may lack viability for venture funding.

**Runway sufficiency:** Realistic runway assessment must account for time needed to demonstrate renewed growth and subsequently raise additional rounds.

**Risk tolerance:** Founders must align fundraising strategy with personal risk appetite and obligations to investors and employees.

**Control preferences:** The PE path preserves founder control at profitability, while venture funding typically requires ceding some control.

## Implementation Challenges

Transitioning to the PE track requires difficult decisions: reducing staff, cutting marketing spend, eliminating expensive offices, and streamlining operations. However, delaying these actions risks worse outcomes with diminishing options.

Median tech startups maintain roughly 15 months of runway with approximately $500K in reserves. Securing acquirers or funding becomes substantially easier from positions of remaining strength rather than desperation.

## Timing and Preparation

Founders should spend 2-3 weeks evaluating options objectively before finalizing track decisions. This evaluation period should include analyzing historical burn rates, projecting growth scenarios, eliminating unnecessary spending, and determining sustainability pathways.

Consulting mentors and advisors experienced with similar situations proves valuable. If switching to PE, founders should identify minimum funding requirements for profitability and establish acceptable deal metrics.

The current climate, while challenging, permits sustainable futures through prudent decision-making and preparation.

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**Want to discuss your options?** Reach out to [einar@discretioncapital.com](mailto:einar@discretioncapital.com) or [schedule a call](https://discretioncapital.com/contact).