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These days, the stakes are higher for everyone. Investors expect faster growth and want a "meaningful stake" (15%+) early on. Meanwhile, entrepreneurs generall

by tonydiv 12y ago

These days, the stakes are higher for everyone. Investors expect faster growth and want a "meaningful stake" (15%+) early on. Meanwhile, entrepreneurs generally try to raise more too. Who doesn't want more cash if they can get it? This is dangerous for those who don't understand these dynamics. The growth trajectory needs to align with the incoming cash. The second you raise a $3M seed round, you're on the roller coaster. You will need to show "hockey stick" growth in 12 months, and raise your A in 18. If not, you're dead.

deleted 12y ago
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danieltillett 12y ago
The problem of course is that only a minority of companies can ever really meet this. This requirement seems to have driven a lot of startups to do things in a way that does not maximise the benefit to the founders [0] - investors can spread the risks over multiple investments while the founder are stuck with all their eggs in one basket [1]. 0. I don't blame the VCs for doing this as they are doing what is best for them and their partners, but as a founder you should look very carefully at what is on offer and if what you are expected to do is viable. 1. Paul's point about the fatal pinch is correct, it is just that it is occurring much earlier (at the seed round) not 6 months from the money running out.
arbuge 12y ago
>> The second you raise a $3M seed round, you're on the roller coaster. You will need to show "hockey stick" growth in 12 months, and raise your A in 18. If not, you're dead. Depends how much control you have, and how resourceful you are in a pinch. If you can figure out how to stay alive until you see a different way to do things without raising more money, then you're not dead. They key is being able to bunker down without investors being able to pull the plug on you... $3m could buy a lot of bunkering time for a small team.

by tonydiv 12y ago

deleted 12y ago

[deleted]

danieltillett 12y ago

The problem of course is that only a minority of companies can ever really meet this. This requirement seems to have driven a lot of startups to do things in a way that does not maximise the benefit to the founders [0] - investors can spread the risks over multiple investments while the founder are stuck with all their eggs in one basket [1]. 0. I don't blame the VCs for doing this as they are doing what is best for them and their partners, but as a founder you should look very carefully at what is on offer and if what you are expected to do is viable. 1. Paul's point about the fatal pinch is correct, it is just that it is occurring much earlier (at the seed round) not 6 months from the money running out.

arbuge 12y ago

>> The second you raise a $3M seed round, you're on the roller coaster. You will need to show "hockey stick" growth in 12 months, and raise your A in 18. If not, you're dead. Depends how much control you have, and how resourceful you are in a pinch. If you can figure out how to stay alive until you see a different way to do things without raising more money, then you're not dead. They key is being able to bunker down without investors being able to pull the plug on you... $3m could buy a lot of bunkering time for a small team.