The fact that dumb money has a derogatory name implies that those who espouse conventional wisdom would urge you not to take it.  While I believe few decisions in life are truly black and white, the answer to this question, "should I take dumb money?", is probably not.  There is good reason to seek 'smart money', such as venture capital, if you can. 

Here's a list of the top reasons to avoid dumb money:

Limited Additional Value Add:  'Smart money ' should provide you with more than capital.  If you find the right partner they should also be able to provide invaluable advice and contacts.  Dumb money investors are traditionally viewed as simply being just pockets - these investors often provide money and little else.

Non-Traditional Valuations:  Dumb money can over-value your company.  Before you let that get you too excited, it's important to understand that being overvalued can make raising future capital very difficult.

Limited Follow-On Capital:  After setting your company up to face a challenging fundraise, dumb money may not be there to provide follow-on capital when you need it most.  Less sophisticated venture investors are generally not as rigorous about keeping capital reserves for their portfolio.  If they have a bad year in the market and you desperately need cash, you may face some very difficult realities (such as having to shut down your company).

Limited Governance:  Dumb money generally does not institute meaningful governance measures into companies.  As I explain in my post, Why Is Governance Important?, governance matters.

All of that said, entrepreneurs should not be allergic to dumb money.  It's not poison.  It's just not as helpful as smart money.  If your business desperately needs capital, you should pursue the best capitalization options available to you.

There are ways to take dumb money that mitigate some of these limitations.  By taking dumb money in the form of a convertible note or as the minority investment in a larger round, you can roll the capital into a round led by an institutional investor, enabling your company to benefit from the  governance, valuation discipline and value-add of the institutional investor.  Taking this money, however, always has an opportunity cost if you could have taken smart money in its place.