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Most startups have already priced this fundraising-drought in their previous fundraisers. Instead of raising exactly what they needed, they over-raised by doubl

by jjoe 11y ago

Most startups have already priced this fundraising-drought in their previous fundraisers. Instead of raising exactly what they needed, they over-raised by double or tripple that. It's selfish in some way as it likely contributed to the negative sentiment and the high valuations. I think this won't be an acute bubble for incumbents but for early stage startups that need funds badly to keep the short runway clear.

MrBuddyCasino 11y ago
So while HN was still discussing whether or not there really is a bubble, startups already acted accordingly. This is an interesting disconnect to observe. Now did they over-raise because they were afraid of a bubble or did they know there was one? A pointless debate, probably.
- kasey_junk 11y ago
  There is no way to know if there is a bubble until after it happens.
bobby_9x 11y ago
This is usually bad for the founders, because if it sells for less than the valuation they received during funding, they will most-likely get nothing. The VC always get paid first. Founders either need to get out early, understand that their position will eventually be just an employee, or not take in more funding than the company is worth. It does, however, work out in the tiny chance that the company sells for way more than it’s valued worth.
forgetsusername 11y ago
>Instead of raising exactly what they needed, they over-raised by double or tripple that Do you have any evidence of this? On the surface, it doesn't even make sense. There are two sides to every transaction; are you claiming that the entrepreneurs could see the slide coming, and anticipated it, but the financiers didn't?
- bitserf 11y ago
  I was working for a startup in 2008, and before everything turned to crap, Sequoia gave us up front warning to start preparing for the coming apocalypse, which probably is the reason we survived and made it to an exit of some sort. Over-raising seems like more proactive version of that (2008 still being relatively recent in investors' memory), and VCs likely suggested this to portfolio companies.
- morenoh149 11y ago
  Slack publically admitted this. Saying money was cheap so they got a lot of it.

by jjoe 11y ago

MrBuddyCasino 11y ago

So while HN was still discussing whether or not there really is a bubble, startups already acted accordingly. This is an interesting disconnect to observe. Now did they over-raise because they were afraid of a bubble or did they know there was one? A pointless debate, probably.

kasey_junk 11y ago
There is no way to know if there is a bubble until after it happens.

bobby_9x 11y ago

This is usually bad for the founders, because if it sells for less than the valuation they received during funding, they will most-likely get nothing. The VC always get paid first. Founders either need to get out early, understand that their position will eventually be just an employee, or not take in more funding than the company is worth. It does, however, work out in the tiny chance that the company sells for way more than it’s valued worth.

forgetsusername 11y ago

>Instead of raising exactly what they needed, they over-raised by double or tripple that Do you have any evidence of this? On the surface, it doesn't even make sense. There are two sides to every transaction; are you claiming that the entrepreneurs could see the slide coming, and anticipated it, but the financiers didn't?

bitserf 11y ago
I was working for a startup in 2008, and before everything turned to crap, Sequoia gave us up front warning to start preparing for the coming apocalypse, which probably is the reason we survived and made it to an exit of some sort. Over-raising seems like more proactive version of that (2008 still being relatively recent in investors' memory), and VCs likely suggested this to portfolio companies.
morenoh149 11y ago
Slack publically admitted this. Saying money was cheap so they got a lot of it.