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Easier and cheaper to raise some capital when you don’t need it (as backup and for scaling) than later.
by punnerud 7y ago
Easier and cheaper to raise some capital when you don’t need it (as backup and for scaling) than later.
- codingdave 7y agoI've heard that, too. But I've never bought into it. Maybe I'm naive, but it seems to me that giving up any equity when you don't need to is unwise. As far as easier and cheaper, I have not seen costlier terms sheets due to need. Easier... maybe, if you are doing so well that it is a no-brainer to want to be part of it. But then it gets back to the point of giving up equity when there is no need.
- nikanj 7y agoPay attention to the messenger too. If a VC tells you to raise money ”just in case”, they might mean ”I want in on your explosive growth”. Nothing wrong with that, just be mindful of people’s motives.
- Arnt 7y agoIn my experience, VCs are friendly, honest, helpful and understanding — and they absolutely will adjust their offers depending on whether you have time to shop around for better offers before you have to start laying off people or even closing altogether.
- vchak1 7y agoThe analogy I give is this - when you fly SF to NY, the pilot does not have exactly the correct amount of fuel to make the trip. That would be foolish. You'd want to have some reserve (say another hour or two of fuel) as insurance. Sure, that costs you equity, but its insurance equity.
- rorykoehler 7y agoIt's always more expensive than not if you never need it.