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> New investors strengthen the investor syndicate which makes the company more resilient. New investors bring new ideas, new experiences, and new sources of fun

> New investors strengthen the investor syndicate which makes the company more resilient. New investors bring new ideas, new experiences, and new sources of funding to the business. uh, citation needed? Investors aren't meant to be there to bring 'ideas and experiences', and adding new ones to a company that isn't doing well feels like it would just add more tension and disagreement when what is probably needed is a laser vision that hopefully the founding team should be providing..

alberth 4y ago
Given that Fred Wilson (the blog author) is a renowned VC with 30+ years experience and dozens of famous investments … him saying it is the citation you’re looking for. It’d be like you asking for a citation when Michael Jordan makes a comment about the game of basketball :)
- jonathankoren 4y ago
  Fred Wilson is also financially incentivized to make you believe that he has your best interests at heart. This is no different from a monorail salesman telling you need a monorail, because he sold them to Brockway, Ogdenville, and North Haverbrook, and by gum! That put them on the map! I'd rather hear from the people that took the investment, especially the ones that crashed and burned.
  - alberth 4y ago
    What you're saying doesn't even make sense. Fred is explicitly stating that it's good for a business to get new investors, and to not just keep taking money from the existing investors. That's the exact opposite of what a typical VC would tell you. When new investors come into a company, the existing VC gets diluted. How is this advice not in the founders interest?
    - jiveturkey 4y ago
      dilution is good for you
      - alberth 4y ago
        How is being diluted good for an investor? If a VC went from owning 20% of a company to now own 10% - how is that good for the VC?
        browningstreet 4y ago
        No VC wants to be the only investor -- more investors, more validation, greater valuations, bigger upside.
        jacquesm 4y ago
        And not unimportantly: more people whose problem it is if things go South and then one of those might provide a solution acceptable to the remainder or there may be more people to spread the blame. Win win...
        mason55 4y ago
        > If a VC went from owning 20% of a company to now own 10% - how is that good for the VC? Because that's not all that happens. The company also has a bunch more cash which means it's worth more. You own less of a bigger pie but the actual value of your slice shouldn't change. If you have 10 out of 100 shares of a company and it has a $10m pre-money valuation, your share of the company is worth $1m. Now the company raises $2m. The new investors get somewhere between 16 and 20 (newly issued, dilutive shares). Now you have 10 out of 116 - 120 shares. 8.3% - 8.5% of a company worth $12m ($10m + the $2m in cash). Which puts the value of your shares right around your original $1m. Except now the company has all this cash as well, so you're probably better off.
        rileymat2 4y ago
        This only matters if the cash is deployed in a ROI positive way, because that cash you are accounting for will soon become something else.
sbierwagen 4y ago
Fred is a VC. VCs don't want to be just a dumb pipe of money, competing on terms, they want to be management coaches and compete on unmeasurable intangibles-- in exchange for more of the company at a lower price.
- mandelbrotwurst 4y ago
  ...and on top of that, many founders do want this for good reason! Even with "laser vision" with respect to the future of your product, it's likely that you'll benefit from advice from someone with decades of experience.
- jacquesm 4y ago
  > VCs don't want to be just a dumb pipe of money, competing on terms What they want and what they are is not necessarily the same. Plenty of VCs are just dumb pipes for money. There are exceptions.

alberth 4y ago

Given that Fred Wilson (the blog author) is a renowned VC with 30+ years experience and dozens of famous investments … him saying it is the citation you’re looking for. It’d be like you asking for a citation when Michael Jordan makes a comment about the game of basketball :)

jonathankoren 4y ago
Fred Wilson is also financially incentivized to make you believe that he has your best interests at heart. This is no different from a monorail salesman telling you need a monorail, because he sold them to Brockway, Ogdenville, and North Haverbrook, and by gum! That put them on the map! I'd rather hear from the people that took the investment, especially the ones that crashed and burned.
- alberth 4y ago
  What you're saying doesn't even make sense. Fred is explicitly stating that it's good for a business to get new investors, and to not just keep taking money from the existing investors. That's the exact opposite of what a typical VC would tell you. When new investors come into a company, the existing VC gets diluted. How is this advice not in the founders interest?
  - jiveturkey 4y ago
    dilution is good for you
    - alberth 4y ago
      How is being diluted good for an investor? If a VC went from owning 20% of a company to now own 10% - how is that good for the VC?
      - browningstreet 4y ago
        No VC wants to be the only investor -- more investors, more validation, greater valuations, bigger upside.
        jacquesm 4y ago
        And not unimportantly: more people whose problem it is if things go South and then one of those might provide a solution acceptable to the remainder or there may be more people to spread the blame. Win win...
      - mason55 4y ago
        > If a VC went from owning 20% of a company to now own 10% - how is that good for the VC? Because that's not all that happens. The company also has a bunch more cash which means it's worth more. You own less of a bigger pie but the actual value of your slice shouldn't change. If you have 10 out of 100 shares of a company and it has a $10m pre-money valuation, your share of the company is worth $1m. Now the company raises $2m. The new investors get somewhere between 16 and 20 (newly issued, dilutive shares). Now you have 10 out of 116 - 120 shares. 8.3% - 8.5% of a company worth $12m ($10m + the $2m in cash). Which puts the value of your shares right around your original $1m. Except now the company has all this cash as well, so you're probably better off.
        rileymat2 4y ago
        This only matters if the cash is deployed in a ROI positive way, because that cash you are accounting for will soon become something else.

sbierwagen 4y ago

Fred is a VC. VCs don't want to be just a dumb pipe of money, competing on terms, they want to be management coaches and compete on unmeasurable intangibles-- in exchange for more of the company at a lower price.

mandelbrotwurst 4y ago
...and on top of that, many founders do want this for good reason! Even with "laser vision" with respect to the future of your product, it's likely that you'll benefit from advice from someone with decades of experience.
jacquesm 4y ago
> VCs don't want to be just a dumb pipe of money, competing on terms What they want and what they are is not necessarily the same. Plenty of VCs are just dumb pipes for money. There are exceptions.