Unicorns, startups with $1B values, are what every venture capitalists’ dreams are made of. Unicorns produce dizzying investment returns. It takes only one for a venture fund to exceed the wildest expectations of its limited partners, being those investors that bet on VCs to find just one such startup. Venture funds promise returns well above what mere mortal investors expect, so they have to hunt for unicorns. If a venture fund finds a unicorn, its partners are golden; they have little problem raising more money to hunt for more unicorns. If a venture fund ends up with no unicorns, only narwhales, that may be the last money they raise. Both the investors in such funds and the VCs that lead such funds understand the stakes are high and the odds low in the unicornhunt. Well, almost everyone understands.

Several recent conversations, along with a fascinating column in the New York Times, got me thinking about how witting founders are to the impact of taking venture capital dollars is to how they run their businesses. Erin Griffith, the NYT columnist, interviewed a number of founders who are beginning the rethink the lure of venture capital. She attended an event in New York where founders began “to question the investment framework that has supercharged their field.” The problem with taking venture capital is a problem of how to grow. To put it succinctly, by taking venture capital, an entrepreneur foreclosesall strategies on how to grow, but one. Griffith suggests that once a startup is funded by venture capital, it is compelled to “use the cash to grow aggressively – faster than the competition, faster than regulators, faster than most normal businesses would consider sane.”

With venture funding, the pressure is on to execute. “But for every unicorn, there are countless other start-ups that grew too fast, burned through investors’ money and died – possibly unnecessarily.” Griffith continues, “start-up business plans are designed for the rosiest possible outcome, and the money intensifies both successes and failures.” The implication is that a venture investment is binary, launching the startup on a path to immense returns or total failure: unicorn or narwhale…

While I agree with the premise that venture capital accelerates execution, the decision to take such funds should weigh three factors: team, business model, and timing. Not every team is cut from a cloth that can hold up to the pressures of rapid growth. It takes a certain type of leadership team and a certain culture to pull it off.Not every business model requires rapid growth to succeed. In fact, most need to figure out their product or service iteratively through trial and error, working with (and sometimes funded by) early adopter customers. The question of venture capital is not simply one of “whether” but of “when”. Is the team developed and ready for accelerated growth? Has the business model evolved so there’s enough insight on the need, the market and the strategy to accelerate execution? Venture capital is only a Faustian pact if the entrepreneur doesn’t fully understand the impact of such dollars.

Venture capital isn’t for every startup. An infinitesimally small number of startups become unicorns. But that’s ok. In fact, most startups that succeed do so without venture funding. If Griffith’s column did anything, hopefully it helped level set the compunction that entrepreneurs have to measure their success in part by who invested. There’s no faster way to become a narwhale than to take money when you don’t understand the consequences.

With more than 30 years’ experience in law and business, Newt Fowler, a partner in Womble Bond Dickinson’s business practice, advises many investors, entrepreneurs and technology companies, guiding them through all aspects of business planning, financing transactions, technology commercialization and M&A. He’s the pastboard chair of TEDCO. Newt can be reached at newt.fowler@wbd-us.com.