5 ms·
Throughout the article, the founders mention "making room" or hoping to "have room" for some investor. I mean, wouldn't you have infinite room for investors? Wh
by gtirloni 13y ago
Throughout the article, the founders mention "making room" or hoping to "have room" for some investor. I mean, wouldn't you have infinite room for investors? What's limiting how much they can take? As it's obvious, I've never done at fund raising, so can someone explain (or point to a reference) what's the deal?
- iwasphone 13y agoInvestors arrive at an amount based on their estimate of the company's value and the share of equity they receive in return for their investment. If the founders then get commitments from additional investors, the company would have to attain a much larger value at exit time (i.e., IPO or purchase) for any of the investors to get a reasonable return. When done with consent it's called overcommitting. When done without consent, it's called fraud. Disclaimer: IANAI