The problem is that once you take the VC coin, you are pushed towards hyper-scale. If you don't take the VC coin it's a much harder and longer path to self-sustainability, unless you have some way to fund yourself e.g. consulting. 37 Signals is the model here, but they are super-exceptional (they created Rails, after all).
Then having got there, a VC-funded competitor will just roll over you as they'll have better connections and funding.
Then having got there, a VC-funded competitor will just roll over you as they'll have better connections and funding.