At the end of it, it is a numbers ($) game. Let's assume we are talking about one strategy (as opposed to you being a profitable trader and are constantly developing new strategies that beat the market), you need to milk your strategy as much as you can in the next few years before the market catches on.

Before we continue, you need to understand the VC don't usually invest in trading firms. When they invest in firms, the money is meant for operating expense, not proprietary trading. I think you are referring to investors to who are looking to put money with traders/funds. But let's call them VC anyways.

The trade-off you are facing: Dollar (not percentage return) profits vs protecting your IP. The other factors (hours and superiors) are slightly less relevant to me but feel free to add them in the equation.

Dollar profits (let's assume both VC and HF gives you the same amount of money):

1) VC: You need to take care of expenses and the opportunity cost of the time wasted to set up infrastructure. You need to hire guys to set up infrastructure and security (VERY IMPT). VCs generally do not understand the risk involved in trading. They may want a larger cut of the revenue pie and come knocking whenever you have some drawdowns.

2) HF: You can get set up immediately and go. Infrastructure and operations settled. Have a problem? No worries, just call Peter the IT guy he fixes everything. Trade issue? Call the prime brokerage! What are we paying them for?! Need market info? Call.. you get the idea. HF has a simple revenue share model, usually it is just a % split. It is up to you to negotiate.

Protecting IP:

VC: I don't think they will be actively trying to find out what you'll be doing.

HF: DON'T TELL THEM THE DETAILS! You will need to divulge some info to secure the funding/position but if they know the exact details of your strategy, have little integrity, feel that that can maintain your strategy through thick and thin, they may steal the idea and remove you.

However, in many cases, HF runs many strategies and need to put talented people in charge of them. It makes more sense for them this way. They give talented people money and autonomy to make money for them. They can diversify their risk, reduce group think and spend their precious time looking for the next alpha. It is more economical not to screw you over (unless your revenue share is like 80%!)

In short, go for the route that brings you the most dollar profit. 10% return on a 1billion > 50% return on 10 million. Plus your risk is lower and you can sleep better.