This is the first of many of the questions I'd like to have some real VC answer, either in comments here or on their own blogs (add a comment with link if you do)...
Does consulting revenue in an early stage product companby have positive or negative value? And I'm not talking about services bundled around the area or product you are building or selling, just plain old contracting work.
I had a discussion about this before with another company founder - my contention is that VC are not fooled in the least to think that you being able to generate revenue by consulting has any bearing on being able to sell a product, and in fact just the opposite is the case - that by demonstrating that you are spending substantial amounts of time outside of building the product and company, you are in fact showing a lack of committment to your company and that essentially you are working part-time on what they are funding. That goes against the VC wisdom that they want you have lots of 'skin in the game'.
To summarize the opposing viewpoint, its that by showing consulting revenue you can more easily bootstrap the company and show to the VC that you don't NEED their money, thus making them fall over themselves to give you money. Building a 'customer base' from consulting shows you have some target prospects for the product, as well. Feel free to expand on this if you take this viewpoint...
I have personally done some consulting work when starting a company but I did it almost exclusively off the company books as far as the VC was concerned (whether you want to use your company shell to deal with billing, liability, and tax issues is a completely different question and for that purpose it may be useful to use your company) and they only saw bits of that revenue deep in due diligence when they were looking through historical financials.
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