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Why raise two rounds, diluting your own shares, if you then don’t spend it to grow and capture a larger market? It seems counterintuitive to me. Surly the VCs

Why raise two rounds, diluting your own shares, if you then don’t spend it to grow and capture a larger market? It seems counterintuitive to me. Surly the VCs expect you to spend the investment, and not doing so isn’t maximising the value of their investment?

debarshri 4y ago
Because raising capital sets a price on the company. Now we know retool is $3.2B in value.
krn 4y ago
The Retool's founder explained this in the linked comment: > TBH, fundraising is kind of like charades: it's a way to signal you are doing well, without telling people your private company metrics. I wish we never needed to fundraise, and could just focus on building great products and working with customers instead. :)
- jokethrowaway 4y ago
  If they didn't need the money, they could do just that. The real advantage is for when they decide to sell in X years. Instead of being bought for 1B by Microsoft they'll get 5B because other VC overvalued them in the past.
- antupis 4y ago
  Yeah it is signal to potential customer, employees and also it always help if you have some money at bank.
  - powerhour 4y ago
    It's a signal to me that they're not confident about their market position and will probably need to return the money when VC gets tired of waiting for the growth they typically demand.
    - krn 4y ago
      They would have never been able to raise three consecutive rounds with increasing valuations without demonstrating to VCs the growth they typically demand.
seanhunter 4y ago
Firstly, if you're going to raise at all, why not raise when you are in the strongest possible negotiating position (ie when you don't actually need the money)? Presumably they think they may need the money at some point in the future. If you are burning through your runway that gives you additional pressure and VCs can run out the clock and delay rounds to try to get a better deal. Having cash committed takes all of that off the table, and even if there is a downturn etc you have your funding secured from a position of strength and don't need to go cap in hand down the Sandhill road during tough times. Secondly (some) VCs bring more than just money to the table and by becoming part of their network you get access to their help etc. In my experience even for some pretty big-name VCs this is a dubious benefit but some people like it. Thirdly the founder gets to act like a bigshot raising a pile of cash.

debarshri 4y ago

Because raising capital sets a price on the company. Now we know retool is $3.2B in value.

krn 4y ago

The Retool's founder explained this in the linked comment: > TBH, fundraising is kind of like charades: it's a way to signal you are doing well, without telling people your private company metrics. I wish we never needed to fundraise, and could just focus on building great products and working with customers instead. :)

jokethrowaway 4y ago
If they didn't need the money, they could do just that. The real advantage is for when they decide to sell in X years. Instead of being bought for 1B by Microsoft they'll get 5B because other VC overvalued them in the past.
antupis 4y ago
Yeah it is signal to potential customer, employees and also it always help if you have some money at bank.
- powerhour 4y ago
  It's a signal to me that they're not confident about their market position and will probably need to return the money when VC gets tired of waiting for the growth they typically demand.
  - krn 4y ago
    They would have never been able to raise three consecutive rounds with increasing valuations without demonstrating to VCs the growth they typically demand.

seanhunter 4y ago

Firstly, if you're going to raise at all, why not raise when you are in the strongest possible negotiating position (ie when you don't actually need the money)? Presumably they think they may need the money at some point in the future. If you are burning through your runway that gives you additional pressure and VCs can run out the clock and delay rounds to try to get a better deal. Having cash committed takes all of that off the table, and even if there is a downturn etc you have your funding secured from a position of strength and don't need to go cap in hand down the Sandhill road during tough times. Secondly (some) VCs bring more than just money to the table and by becoming part of their network you get access to their help etc. In my experience even for some pretty big-name VCs this is a dubious benefit but some people like it. Thirdly the founder gets to act like a bigshot raising a pile of cash.