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Fundamentally the 'three round' model was about the risks, first was execution risk (can the team actually build what they say they can?), the second was market

Fundamentally the 'three round' model was about the risks, first was execution risk (can the team actually build what they say they can?), the second was market risk (will the market see enough value in the product to pay enough for it to give the company at least 33% net margins for R&D/growth?), and then round three was scaling risk (what is the addressable market for this product? How much has been reached so far? How much more could be reached?) After those three rounds you are a going concern with hopefully 10 - 20% market share and an IPO will repay the investors, give you a regular way to raise capital on the open markets, Etc. Way too many 21st century start ups were investors scamming other investors :-)

JumpCrisscross 3y ago
> first was execution risk (can the team actually build what they say they can?), the second was market risk (will the market see enough value in the product to pay enough for it to give the company at least 33% net margins for R&D/growth?) The MVP condenses these risks. Building and delivering a product to a customer shows execution capacity and product-market fit. This is where angels and seed investors should live. If you have a proven tech team, trivial technology risk and a free product, however, delivering an MVP becomes a function of capital. Which means rounds go straight to scaling. That final collapse, and the ensuing problem of future scaling rounds collapsing to the first, a direct consequence of low discount rates, which bring the future closer to the present, is where Silicon Valley's problems came from.