I had received a late-night request from a former student who had graduated and was out on the West Coast getting business model advice from potential angel investors. It was terrible advice given what I knew about the student, her vision, and her own risk profile. They were encouraging her to take her solid idea for a product that she could fund through customer pre-orders and instead encourage her to adopt a business model that was riskier, required more upfront investment, and might lead to product design choices that would create an enormous environmental footprint.

You’ve seen this business model in action patterned after the Gillette razor and razorblade if you owned a Nintendo console, a Brita water jug, a Nespresso coffee maker, or an OB toothbrush only to notice the highly-priced game cartridges, water filters, coffee pods, or toothbrush heads that you have to buy on a regular basis.

That night I drafted a blog post describing the perils and pitfalls of the Razor/Razorblade business model which then led to more business model tear-downs and the publishing of this simple library. Six years later, these library posts garner over 40,000 unique page views per month and led to a global and inbound client base for my consulting practice helping founders and investors design their business model journey.

Emerging Options

During the past few years, I started to see the emergence of similar decisions and options with the advent of new and rediscovered types of capital. Somehow within that same time frame, venture capital has claimed prominence as the only type of capital available to entrepreneurs, and the opinions of VCs started to infiltrate the type of mentor advice given to early-stage companies. Yet venture capital is only available to 0.62 percent of entrepreneurs in the US and even less globally. Even in highly connected startup ecosystems like the Bay Area, Beijing, and NYC, that same capital is harder to get if you don’t easily fit the pattern mold of a “backable” entrepreneur.

I have personally benefitted from venture capital. But I’ve also seen the dark side, particularly since about half of VC firms are not able to return value above-market rates to their shareholders and encourage increasingly risky strategies in order to make good on their promise to increase their returns by 10x or even 100x. I have also found most founders do not know that once they accept a certain kind of accelerator or angel capital in exchange for equity, they are on the clock and expected to begin growing exponentially in order to prove that they are viable for future rounds of funding.

Questioning the “Traditional” Path

When I started teaching in university settings, I thought at first that my role was to help students translate and code-switch to make themselves believable to early-stage equity investors. By learning the patterns of “back-ability” and the performance art of the grand narrative pitch, students could start to access this capital. Yet as my teaching shifted to work with students who have experienced entrepreneurship as underrepresented and minority groups in the US, I was suddenly confronted with questions about alternatives.

Once students followed the forward arc of what happens to a VC-backed company, they were no longer sure the path was right for them. “What if I don’t want to give up ownership?” “What if I want to share the wealth with my community?” “How do I create spaces for more people like me to experience the same success?” “Is there any other way to get this funded?” Then other, pertinent questions that I asked myself in similar situations, like “What if I do not believe if I have permission to fail?” and “What if I don’t have friends and family that can afford for me to fail?”