Why not do a Wework, raise 'more money' if you can find people fool enough to hand it over. then launder it by having the company buy or lease stuff from you at inflated prices. In the end the companies success is not really the goal now is it?
Raise Less Money
81–90 of 110 posts
Re: Raise Less Money
#82I have not raised recently, but when we tried to raise in 2013, the silliest thing was the "requirement" to move from NYC to SF/SV. Operating in NYC (as opposed to SF/SV) alone would allow us to raise less. I'd raise less, but i'd love to also base myself in a lower C-o-L location than SF/SV. I hear this isnt as common now, but i'd love to hear fresh stories.
That seems to be the case less and less.
Re: Raise Less Money
#83[deleted]
Re: Raise Less Money
#84As someone who chose to raise only 40% of what was available at the same terms, the decision seems even better in hindsight. VC funding comes with expectations for how new capital will be deployed until the next round, and if you raise a lot in the A but don't have enough progress to show for it before the B, you're going to be in a tough spot. So it's not just about dilution; you're reducing your risk for the next r…
Did you take less from each investor, or cut out some of the interested investors?
Just less money from the lead investor.
Re: Raise Less Money
#85Didn't HBO's Silicon Valley do a bit about this?
Exactly my first thought
Re: Raise Less Money
#86Aaron is very smart, but what this article is missing is that valuation often follows the amount of capital you raise. What I mean is your valuation is determined by the demand for your shares. VCs have a specific ownership % they need for their model to work. Whether that is 10% or 20%, large rounds at very high valuations happen because of bidding wars. More VCs are bidding over that 10% or 20% they are looking for…
Thanks - at any given round, dilution is driven by how much money the founder agrees to take. No outside party can force a founder to take dilution, it takes an agreement on both sides. While VC ownership targets are part of their business models, founders don't actually have to agree to meet them. From what I've seen, those targets are far more flexible than anyone admits at the start of a negotiation.
No outside party can force a founder to take dilution, but unless you are the hot oversubscribed startup, rounds are often just enough money and you find yourself coming back hat in hand to be diluted over and over.
Re: Raise Less Money
#87My guess is that this advice of "raise less money" is a result of hanging around too many successful founders. That is, if you talk to successful founders, they will generally wish they raised less money (due to dilution). And, if you talk to failed founders, they will generally wish they raised more money (to increase likelihood of true PMF). Also, I think that fear is a useful mental state when there is real and im…
In many cases "raise less money" is actually "hire less people". When seeing it as a "we hired too quickly", I see the same problem in failed, pivoted, and successful startups. It is your basic mythical man month problem, and most if not all VCs encourage this management mistake.
I believe that the entire idea of accumulating runway from raising money is mostly a fallacy: VC expect money to be used for finding victory (and a bigger one, while you're at it), not for postponing defeat. All of that nice money is earmarked for doing things that you didn't did before, not for filing existing holes.
Staying within the aviation metaphor you get a longer runway, but also a heavier plane with many more seats. You'll better not have oversold on the capabilities of your engines.
Re: Raise Less Money
#88My guess is that this advice of "raise less money" is a result of hanging around too many successful founders. That is, if you talk to successful founders, they will generally wish they raised less money (due to dilution). And, if you talk to failed founders, they will generally wish they raised more money (to increase likelihood of true PMF). Also, I think that fear is a useful mental state when there is real and im…
I had a company, and I was not particularly successful at raising money. I'm quite confident the main reason for this is because I was brutally honest about what was and was not possible, as investors offered me millions if I would just try X or Y. I would analyze their proposals, and come back and say "this will never make money and I can show it with incredible certainty." They then gave that money to someone else…
For a large part you cannot be certain of a lot of things in a startup. So being honest is not entirely relevant. What matters is your genuine belief in making it a succes and are able to bring that message to the vc.
Re: Raise Less Money
#89Earlier quoted context omitted.
It physically hurts me to think about how dead accurate this is. You tell someone exactly why something won't work? Get rewarded with a door to the face. You save precious time because you care about actually building something of value. But you get no money. Yes Man comes along. Takes the money. Fails spectacularly. Yes Man doesn't give two shits about improving anything and walks away rich(which is all they even wa…
Being right in the middle of that I have to say I'm surprised by a lot of the investors we've talked to and how they seem to want to fit everything into easy, simple and existing templates. Basically, risk aversion. The big downside of that is that that means non-innovative (not novel/new). Non-innovative projects usually doesn't work out - after all, they're not innovative. So, in other words, investors are looking…
> So, in other words, investors are looking for non-innovative projects (due to their blind risk-aversion). Why would you do that? If you are looking for low risk, index funds are available. There are lots of options if you want to spread your risks. I guess the simple answer is most I've talked to simply aren't that smart (as investors anyway)... :/
Software VCs are so risk averse because startups have to find product market fit, which is already risky without throwing a bunch of tech risk on top of it.
That PMF bit is crucial: biotech VCs' don't follow that same pattern because they have relatively precise methods to identify product market fit, before the drug is even approved for sale. They have much more precise data on how many potential potential customers each drug could possibly have from public health data, how much they can afford from previous agreement and contracts with insurers combined with quality of life improvement estimates for the drug candidate, and a minimum of a 5 year monopoly which is usually closer to 14 years. Thanks to those factors, biotech companies have a damn-near-guaranteed exit strategy by phase 3 trials in the form of an acquisition or zero revenue IPO and the VCs can take much bigger risks.
Re: Raise Less Money
#90> "If you’re a good company, you’re either going to raise your Series A - or Series B - in the next 12 months or have significant revenue such that you won’t need more capital. If you’re doing badly, why would you want to keep working on this for 24 or 36 months? That’s a waste of your time."
I'm a big fan of Aaron and his posts, but strongly and respectfully disagree with this line of thinking. As a VC, I've worked with companies that raised after 12 or 15 months, but most require a lot more time. I'm guessing median time from seed to A these days is something like 20 months, and I've seen as high as 35-40 months (including for YC co's I've worked with). Some companies just take longer to figure things out because they need a few small pivots first, or they're creating a new category and need time to figure out how to message their product, or etc.
We've backed several companies at seed that are now worth $100m+ but took years to get from seed to A.
Anecdotally when I ask founders about their seed rounds, almost no one regrets raising too much, but a lot of people regret raising too little.