The Rise and Fall of My Startup Agency: Lessons from Venture Capital

The Rise and Fall of My Startup Agency: Lessons from Venture Capital

The Start: From Brand Strategy to High-Stakes Startups

In 2019, I was working at the New York Post as a brand strategist. I loved the structure, the consistency, and the ability to shape campaigns. But I also felt like we weren’t pushing boundaries or executing the wild, envelope-pushing ideas that the Post was known for. While my team had incredible ideas, we were often constrained by budget limitations and leadership’s risk appetite.

Meanwhile, I was getting more and more freelance work—helping startups grow, working on rapid development projects, and advising on creative strategy. My past experiences at Refinery29, American Apparel, and Fab.com had instilled in me a love for the high-stakes, high-reward nature of the startup world. I missed the adrenaline rush of fast execution and big wins.

Building an Agency in Collaboration with a VC Firm

That’s when I stumbled upon an opportunity with a venture capital firm (which I’ll keep unnamed). They were incubating a family VC fund for various early-stage startups. It sparked an idea: what if we created a financial model where we worked alongside the VC firm, providing branding, design, and development support for their newly funded companies?

The concept worked. Startups that received funding needed branding and strategy expertise—and we could provide that. This turned into a lucrative opportunity, allowing us to secure a steady stream of clients. But then the idea got bigger:

Why don’t we formalize this?

We proposed making our agency an official subsidiary of the VC firm while maintaining strict NDAs so that we weren’t beholden to their oversight of our operations. This way, we could work with their investments while still maintaining independence. At first, it worked seamlessly.

The Success: A Thriving Business Model

For the first six months post-incorporation, things were going extremely well. We had a solid revenue stream, a growing client base, and an arrangement that seemed mutually beneficial. The VC firm got high-quality branding and marketing for their portfolio companies, and we had an endless supply of clients in need of our services.

We were on track to becoming a self-sustaining powerhouse. Until the VC firm got greedy.

The Downfall: VC Greed and the Shakedown

As soon as we started making real money, the VC firm wanted more control. Initially, they just wanted transparency in our financials—fair enough. But then, they started shifting costs onto us, using our company to offset their own expenses, including their office space and operational overhead.

Then, they pulled an even dirtier move: charging us a consulting fee for “helping” us—even though we were the ones delivering value to their investments. They deliberately positioned themselves to ensure that we remained dependent on them, even though we were securing clients independently.

The final blow came when the VC firm stopped providing us with clients, arguing that we had become too reliant on them. They then strong-armed one of our biggest clients into paying us double—knowing it would jeopardize our relationship with that client. This move ultimately led to the company’s collapse.

Lessons Learned: Why You Should Keep VC Firms at Arm’s Length

Looking back, I now understand that our original model should have been one of mutual benefit but clear separation—like a bird cleaning an alligator’s teeth without getting eaten. The VC firm, however, couldn’t resist trying to devour the bird.

Here’s what I learned:

  1. VCs Want Control – They will always seek to own more than they contribute, even when a mutually beneficial system is in place.
  2. Financial Independence is Key – If a company can survive without its main investor, it should never become financially dependent on them.
  3. Transparency is a Double-Edged Sword – While transparency is important, too much access gives investors leverage to manipulate finances.
  4. Build a Network Outside of Your Investors – Relying solely on one pipeline of clients is a death trap.

Final Thoughts: My Failed Agency Was My Greatest Teacher

Even though this agency failed, it remains one of the most valuable experiences of my career. It showed me the inner workings of venture capital, the pitfalls of working too closely with investors, and the importance of maintaining operational independence.

Would I do it again? Maybe. But next time, I’d ensure the alligator never gets a chance to bite.