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Having large funding rounds contingent on meeting milestones is common. Always has been.
by Aurornis 7mo ago
Having large funding rounds contingent on meeting milestones is common. Always has been.
- ares623 7mo agoThe assumption that's conveniently left out is that the milestones are realistic
- wmf 7mo agoWhy not announce the funding after the milestones have been met?
- apparent 7mo agoIt's splashier this way, and is meant to shape the narrative, make other companies fear their warchest, and make hiring easier. Of course, those who are in-the-know won't be fooled, but the perception of the general public will be set in stone by the PR framing.
- heyethan 7mo ago[flagged]
- Aurornis 7mo agoThe funds are committed under the terms of the deal (share price, things like board seats, and other details). There are legal obligations to provide it. This is a common structure for large investments. It would be really inefficient for all of these investors and companies to have to have the money sitting in cash to do a deal and then transfer it into the company's bank where it sits and earns interest for years until they can deploy it. Even VC firms who raise funds work this way. The capital is "committed" but investors don't wire all of the money over right away so it can sit in the VC firm's bank accounts, waiting. The VCs do what's called a "capital call" through which they're legally bound to provide the money they committed when requested, under the terms of the deal.
- jmalicki 7mo agoIt just makes comparing funding rounds hard to understand, since money in the bank is money in the bank, and a lot of the "committed capital if you reach a milestone" is capital that would be easy to get if you reached that milestone, if it is sufficiently advanced, and has enough outs, etc., that you may as well have just raised another round in the future.
- Aurornis 7mo agoThat’s logically inconsistent. If the company was performing poorly enough that they couldn’t meet their funding milestones from a previous round, they’re not going to have an easy time raising the same money in a future round. The milestones aren’t a hard-stop that forbids the previous funding round participants from providing the money if they still choose. It’s just an out.
- JohnMakin 7mo agosure they can. that's the whole point of the "pivot"
- jmalicki 7mo agoWhat I am saying is that if you do meet the milestones from your previous round, you're going to have an easy time fundraising anyway, so funding contingent on milestones isn't that different than just saying "well, if we need more money we can do another round"
- Aurornis 7mo agoFundraising rounds are difficult, laborious, and distracting. It would be extremely different to try to multiply the number of rounds by 3-5X. There's nothing easy about that. You're also ignoring that the market changes frequently. If you only raised as much money as you needed for the next 4-6 months with plans to re-raise all the time, you'd have to constantly be sizing your growth plans up or down based on how the market felt about startup investing that month. Imagine the company having to either do speed hiring or large layoffs every few months to adjust to the size of the fundraising round they were able to get this time around. Nothing about what you're suggesting would be easier, or easy at all
- ds2df 7mo ago[flagged]
- wesammikhail 7mo agoOne of the stipulations is that OpenAI achieves "AGI"... Need I say more? Also a lot of this "money" is in cloud compute and credits not cash so...