
Raise Less Money - Harj
https://www.aaronkharris.com/raise-less-money
======
owens99
Aaron is very smart, but what this article is missing is that valuation often
follows the amount of capital you raise. What I mean is your valuation is
determined by the demand for your shares. VCs have a specific ownership % they
need for their model to work. Whether that is 10% or 20%, large rounds at very
high valuations happen because of bidding wars. More VCs are bidding over that
10% or 20% they are looking for and that drives the price up. Many successful
entrepreneurs say its not the amount you raise that is dilutive, it’s the
number of times you raise.

In addition, good seed VCs are happy to give you a higher valuation when you
have investor demand, so you can take more capital. This was my personal
experience. Before our round closed, we had $X committed at $Y valuation,
giving up 20%. When more capital came calling, our lead was happy to raise the
valuation so we could take more money and increase our odds of success.

Would be great for Aaron to address this point.

~~~
corry
I've heard founders say this too. The mentality is "look, you'll end up giving
away 20% of your company on the round anyways, so you might as well get more
$$$ for that 20%". As if the % is fixed and immovable.

In my own experience, this minimum % ownership target is a very real issue and
bar to jump over for most "proper" Series A VCs. At least the ones leading the
round.

If I was in that position, and it was a great fund, it would be very hard to
imagine saying "no, I'll value my company less, and take less $$$, for the
same dilution." Human nature IMO basically favours taking more $$$ every time
ONCE % is fixed.

However, Aaron might say that the best companies can easily push back on that
fixed % approach, which is the true issue here. And that's a good counter
point. But many of us, even as YC-backed companies, don't know how to
effectively push back against that dynamic.

For me, out of the 5 Term Sheets I got for our Series A, I think all of the
funds involved had a minimum % ownership target. Hard to negotiate around
that. Normally if there is a term you don't like, and you have multiple
sheets, you can just play them off each other. But it seemed pretty universal
in my admittedly narrow experience.

~~~
maire
I was at 2 successful companies that went against the normal VC path.

Vitria was able to move the VC % lower because they were already profitable
and demonstrated potential before approaching the VCs. They were only using
the VCs for their contacts and not for cash.

VMware never got VC funding. I am not sure why - but they tried. They finally
sold themselves to EMC and were later spun out.

~~~
avrionov
According to Crunchbase VMmare raised almost $400M

[https://www.crunchbase.com/organization/vmware/company_finan...](https://www.crunchbase.com/organization/vmware/company_financials)

~~~
kijiki
2/4 rounds (and the overwhelming majority of the $$$ raised) were years after
the EMC acquisition, and immediately before the IPO. Not really what people
think of when they talk about raising VC.

The 5 million and 20 million rounds in 2000 were strategic investments from
partners who were going to resell ESX, and were done for reasons other than
needing working capital. IBM and Dell were the 2 partner investors, IIRC.

------
csmajorfive
I think you're largely right -- a lot of founders get trapped in mediocrity
because they raise so much that they don't feel enough pressure to execute.
And that frequent, high-resolution fundraises are much more viable than they
were ten years ago.

On the other hand, I'll offer two countervailing observations to keep in mind:

* In well-understood categories (e.g. horizontal B2B SaaS), there has been so much brainpower and cash deployed in the last ten years that customers are overwhelmed by noise and expect _much_ higher quality products before they'll meaningfully adopt and pay. My experience is that founders are spending much longer in the initial build phase getting to an MVP than they were ten years ago.

* The oversupply of venture dollars is not evenly distributed. If you're building something that needs years in the lab (chips, batteries, robots, hardware, etc), the investor herd thins out quickly and many of the folks willing to make a purely conceptual bet are much less comfortable judging whether some-progress-but-no-product is worth continued investment.

Sometimes it can be smart to raise a lot from a true believer to bridge you to
the spreadsheet jockeys.

~~~
tixocloud
You're spot on with both observations and it has been our experience with the
venture circuit. Especially for enterprise accounts, the bar is set
significantly higher for what companies are willing to shell out money for.
Good high-quality software that enterprises are willing to adopt generally
takes 1-2 years of full time development. There's definitely a need for true
believers but for founders, without a solid network, it's hard to find.

------
jonathanehrlich
@ Aaron - Thanks, as always, for the thoughtful note but I disagree with you
on this. Yes, there is risk of over-dilution if you raise boatloads too much
out of the gate (including the very real and potentially fatal risk of being
undisciplined on spending). But at the end of the day, if a founder figures
out the business in that first 12 month window and is still sitting on another
12-24 months of cash, she has so much more power than if she is 4 months to
cash out. She can take capital now but exactly on her terms. She can decide to
keep pushing and raise in 12-18 months when the business will be in even
better shape (and valuations higher, etc). Time becomes her friend, not her
enemy. In my opinion, one would be crazy not to take more capital when it's
this insanely cheap (valuations for 2 people with a powerpoint have never been
higher). As we've seen with so many great companies, p/m often takes more than
8 months. Take more than you need and buy time. It will come out in the wash.
I know this may sound self serving given my VC Cloak but having raised my
first venture round as a founder in 1998, it comes from a place of experience
(and pain). Thanks for listening.

~~~
frequentnapper
Is it still possible these days to found a startup and raise funding based on
just powerpoint slides? Are there examples of this?

~~~
threeseed
Yes very common.

Almost always however there is something special about the founders e.g. they
previously exited a successful startup or are simply a rockstar who all the
VCs follow on Twitter.

It's not recent but Canva got funding with just a Powerpoint. And I can't
imagine Justin Kan needing an MVP for Atrium in order to get into YC.

------
smallgovt
My guess is that this advice of "raise less money" is a result of hanging
around too many successful founders.

That is, if you talk to successful founders, they will generally wish they
raised less money (due to dilution).

And, if you talk to failed founders, they will generally wish they raised more
money (to increase likelihood of true PMF).

Also, I think that fear is a useful mental state when there is real and
imminent danger. In startup land, you are right to be fearful, because you are
much more likely to die than stay alive.

If you don't have the luxury of unlimited shots at success (due to a
lackluster safety net or other life goals), it makes sense to maximize the
likelihood of success in your current venture. There is a lot of "startup
cost" to working on a new idea, and in a lot of fields, you will eventually
succeed if you just stay alive/don't die.

~~~
Judgmentality
I had a company, and I was not particularly successful at raising money. I'm
quite confident the main reason for this is because I was brutally honest
about what was and was not possible, as investors offered me millions if I
would just try X or Y. I would analyze their proposals, and come back and say
"this will never make money and I can show it with incredible certainty." They
then gave that money to someone else who offered to do that, and they failed
because it was a terrible idea.

If I had raised more money, I would have wasted even more years before coming
to the very painful reckoning that my startup was just untenable. I realize my
tangent is unlikely related to your point and is separate from the article,
but for a first time founder I am very glad I stuck to my integrity and only
lost a few years of my life learning a valuable lesson instead of a decade.

In fact, I recently had an epiphany - if my startup succeeded and I'd become
rich, I'd be a much shittier person today because of it. That failure fucking
wrecked me but I needed it.

~~~
adverbly
It physically hurts me to think about how dead accurate this is.

You tell someone exactly why something won't work? Get rewarded with a door to
the face. You save precious time because you care about actually building
something of value. But you get no money.

Yes Man comes along. Takes the money. Fails spectacularly. Yes Man doesn't
give two shits about improving anything and walks away rich(which is all they
even wanted).

So hilariously ridiculous, but this kind of thing happens. All. The. Time.

~~~
cjblomqvist
Being right in the middle of that I have to say I'm surprised by a lot of the
investors we've talked to and how they seem to want to fit everything into
easy, simple and existing templates. Basically, risk aversion. The big
downside of that is that that means non-innovative (not novel/new). Non-
innovative projects usually doesn't work out - after all, they're not
innovative.

So, in other words, investors are looking for non-innovative projects (due to
their blind risk-aversion). Why would you do that? If you are looking for low
risk, index funds are available. There are lots of options if you want to
spread your risks. I guess the simple answer is most I've talked to simply
aren't that smart (as investors anyway)... :/

~~~
akiselev
_> So, in other words, investors are looking for non-innovative projects (due
to their blind risk-aversion). Why would you do that? If you are looking for
low risk, index funds are available. There are lots of options if you want to
spread your risks. I guess the simple answer is most I've talked to simply
aren't that smart (as investors anyway)... :/_

Software VCs are so risk averse because startups have to find product market
fit, which is already risky without throwing a bunch of tech risk on top of
it.

That PMF bit is crucial: biotech VCs' don't follow that same pattern because
they have relatively precise methods to identify product market fit, before
the drug is even approved for sale. They have much more precise data on how
many potential potential customers each drug could possibly have from public
health data, how much they can afford from previous agreement and contracts
with insurers combined with quality of life improvement estimates for the drug
candidate, and a minimum of a 5 year monopoly which is usually closer to 14
years. Thanks to those factors, biotech companies have a damn-near-guaranteed
exit strategy by phase 3 trials in the form of an acquisition or zero revenue
IPO and the VCs can take much bigger risks.

------
lpolovets
> "If you’re a good company, you’re either going to raise your Series A - or
> Series B - in the next 12 months or have significant revenue such that you
> won’t need more capital. If you’re doing badly, why would you want to keep
> working on this for 24 or 36 months? That’s a waste of your time."

I'm a big fan of Aaron and his posts, but strongly and respectfully disagree
with this line of thinking. As a VC, I've worked with companies that raised
after 12 or 15 months, but most require a lot more time. I'm guessing median
time from seed to A these days is something like 20 months, and I've seen as
high as 35-40 months (including for YC co's I've worked with). Some companies
just take longer to figure things out because they need a few small pivots
first, or they're creating a new category and need time to figure out how to
message their product, or etc.

We've backed several companies at seed that are now worth $100m+ but took
_years_ to get from seed to A.

Anecdotally when I ask founders about their seed rounds, almost no one regrets
raising too much, but a lot of people regret raising too little.

~~~
zeckalpha
Those delays seem correlated with the OP’s point: those earlier rounds are too
large. If the rounds were smaller, they wouldn’t wait 40 months between
rounds.

------
compumike
The "certainty of over-dilution" is an important technical point. It seems to
be a consequence of the illiquidity and high friction of conventional priced
equity rounds. But it may be possible to design a fundraising instrument that
avoids this problem.

For example: company raises $10M Series A, issuing 2 million new shares at $5.
Let's modify our special Series A docs to include a provision where the
company has the option to repurchase up to 1 million of these shares at any
time. The pre-agreed repurchase price is $5 per share plus some time-based
interest rate and/or a fixed markup. (Hmm, this sounds a lot like convertible
debt...)

If the company becomes profitable quickly they may exercise the option to
repurchase the 1 million shares, reducing dilution while providing both an
immediate return and ongoing upside to the investor.

If the company needs the longer runway, or simply decides it's more beneficial
to use the cash to fund growth, they already have it and the investor has
correspondingly higher ownership.

It's sort of like a vesting schedule for investors.

If such a structure was agreed to, the headline "Raise Less Money" would
probably become "Burn Less Money". Right now, the mere _raising_ of the money
causes the dilution; in this alternative structure, it's the actual _net
consumption_ of the money that causes the dilution, because the alternative
use of that cash can always be to reduce dilution.

~~~
virgilp
But why would an investor agree to that? It's more risk with less upside:

\- if the company does well enough that its share price rises, it's only
normal to buy back your share (why wouldn't it? they just raised better-valued
round! Not buying you out is just leaving money on the table)

\- if the company doesn't do well, there's no reason for it to pay the markup,
they'll simply continue to burn the money.

So you risk the entire sum, but stand to gain significantly only from the non-
repurchasable portion of it. I could _maybe_ see it working for a time-based
interest rate (if the rate was high enough), but not for the fixed markup.
Unless we're talking about a really hot startup that the investors are dying
to buy into and would accept pretty much any terms.

~~~
compumike
Convertible debt agreements address this problem by making subsequent
financing/acquisition/IPO trigger an immediate conversion to equity.
(Similarly, in my alternative, it could simply disable the repurchase option.)

This lets you achieve high resolution financing based on the amount of cash
you have in the bank immediately _before_ the next financing/acquisition/IPO.
If you raised $10M but only spent $6M before raising the next round, you may
use the remaining $4M in the bank to perform the repurchase. But you can't use
the new Series B money for the repurchase. If you consumed $9M then you only
have $1M remaining for the repurchase and will eat more dilution.

Effectively, your dilution becomes a function of how capital efficient you've
been. Investors may agree to it because it might encourage people to build
profitable companies: it encourages companies toward capital efficiency as
they search for product-market fit, while giving companies enough runway to
weather hard times.

For founders, this means your net dilution is now a stronger function of how
well you operate over time (and a weaker function of how well you fundraise).
That may be a good optimization for the startup ecosystem.

I agree with you 100% that "you risk the entire sum" but limit the upside.
There are more knobs but it may be possible to set them in a way that
investors agree to. Imagine my 2M shares @ $5 Series A. Suppose 1M are
repurchasable at $6 (a 20% markup) plus 10%/yr interest rate. At t=0-, the
investor has $10M and the company has $0. At t=0+, the company has $10M in the
bank and investor has 2M shares. At t=1yr, suppose the company has spent $2M
getting launched ($8M remaining) and hits some great milestone (i.e. becomes
profitable, raises a new round, or gets acquired), and it exercises the
repurchase option. After repurchase, the company has 8-6.6 = $1.4M remaining
in the bank, and the investor has $6.6M cash plus 1M shares. The investor's
effective purchase price of their remaining 1M shares is $3.40/share, thanks
to the $1.6M in profits from the repurchase discount and interest.

------
Alex3917
> If you're doing badly, why would you want to keep working on this for 24 or
> 36 months? That’s a waste of your time.

If you were writing a book and it was taking six months longer than expected,
but was otherwise high quality, would you just abandon it? Or would you say
that, you know what, in the big picture an extra six months isn't really
material in terms of the expected benefits that will accrue over the next 20
years of my career?

I understand that by raising capital you're committing to provide a certain
return on investment. But if you're actually making progress toward creating
some asset of value, then structuring your business so that you need to shut
it down if it's taking longer than expected seems to be not aligned with what
would seemingly be in the best interests of any rational stakeholder.

~~~
akharris
Each endeavor you undertake will have different hurdles for how to define
worthwhile progress. You need to evaluate what you're doing against a the
right framework.

To use your example - if you're writing a book as your full time job and,
after 12 months, haven't finished the first page of your manuscript, it would
make sense to seriously reconsider whether or not you should be writing that
book.

~~~
Alex3917
I agree with reconsidering whether or not to continue if you're not hitting
your milestones. But by raising the minimum amount of money necessary to hit
your milestones, you're not giving yourself the ability to reconsider unless
you're default alive.

So I guess what I'm saying is that if you're default alive, this strategy
makes a lot of sense. But if you're default dead, it seems reckless. E.g.
there was nothing structurally wrong with a lot of the companies that got
wiped out due to covid, and I'm sure there were lots of founders that would
have happily just scaled down for six months or whatever but were locked into
agreements that didn't leave them with the ability to do that.

------
doh
There is an old saying that people respond to greed or fear. In fundraising,
the greed is price, the fear is control.

When I fundraise, I start with the greed so investors optimize for it. Right
before we hit an understanding (pre/post term sheet), I switch gears and
exchange lower valuation for more control.

Works really well.

------
curiousllama
This article boils down to "all things equal, it is better to own your company
than not." Yes, of course.

But it also ignores that the primary reason to raise money is to leapfrog: a
business is not short-term sustainable, but IS long-term, and investor capital
gets you over that hump.

With this view, the reason higher-value companies get diluted more is because
the hump is larger: founders can only justify a high valuation with a
significant influx of capital (the before-cash valuation is effectively 0),
leaving the investors with the bargaining power, not the founders.

Yes, people should be less enamored by the VC hyper-growth model than they
are, but that doesn't mean that people already in the forget-short-term-
profits game shouldn't raise a lot of money.

~~~
rabidrat
> a business is not short-term sustainable, but IS long-term, and investor
> capital gets you over that hump.

Unfortunately, investor capital changes the dynamics such that what would be
long-term sustainable without investment, may very well not be long-term
sustainable with investment.

------
lquist
"But I now realize that this is the wrong framing because simply staying alive
is an inadequate goal for a company. Founders start companies to find product
market fit and grow. Venture capital is designed to speed growth, not to
extend runway."

PG says in his essay "How Not to Die": "If you can just avoid dying, you get
rich. That sounds like a joke, but it's actually a pretty good description of
what happens in a typical startup. It certainly describes what happened in
Viaweb. We avoided dying till we got rich."

Aaron pre-empts this by saying that things have changed about the availability
of funding to competent founders over the past 10 years, so the advice should
change. I don't buy that. Shutting down early and raising new money for a new
startup may give you a greater chance of the huge exit, but not dying is the
best way to maximize likelihood of becoming rich. Maybe not unicorn rich, but
FU money rich.

~~~
Mathnerd314
I think there's also "death by VC": raising too much money, losing control of
the company, and then the company heads in an infeasible moonshot direction.
One example might be Google's buy-and-kill strategy. But PG's essay is really
about the early months of a startup, whereas this is later in the game.

------
zackbrown
> If you’re doing badly, why would you want to keep working on this for 24 or
> 36 months?

Doesn't this run exactly contrary to the prevailing YC wisdom that "those who
stay in the game are those who win?"

While pivoting in search of P/M fit, every startup is doing badly — until
they're not.

Would you really suggest to pack it in after 12 months without traction or
luck? Instead of pivoting and adapting? How many of YC's Top 100 wouldn't
exist today if they operated by that advice?

~~~
akharris
I don't agree that that's the prevailing wisdom at YC. As with any other
broadly stated piece of advice, the specifics matter.

I think about this in this way: [https://blog.ycombinator.com/shutting-
down/](https://blog.ycombinator.com/shutting-down/).

------
YazIAm
The idea of raising money to speed up high quality execution instead of
raising money to add “months of runway" is a powerful re-framing IMO. One of
those reframes that sounds so simple one may overlook how different these two
mindsets are, and how easy and tempting it is to fall into thinking about
"months of runway".

I'd argue that general point is the most important idea in this article.
Unfortunately I think the discussion on that more general point may get
drowned out by the discussion of the weaker (and not as widely applicable)
secondary idea in the title — raising less money.

------
thedogeye
Better advice would be to follow this simple rule of capital allocation: If
you're stock is over-valued, sell it. If your stock is undervalued, don't sell
any and instead try to buy it back.

------
ablekh
_" Confident, competent founders should take the risk of running out of money
vs. the certainty of over-dilution"_ \-- I strongly disagree with the author
on this point. I would argue that founders preferring _" risk of running out
of money"_ to _" certainty of over-dilution"_ might very well be considered
_irresponsible_ (or, at least, _not responsible enough_ ) instead of _"
confident"_.

Firstly, because it is extremely difficult to accurately estimate future
financial needs of an early startup (due to lots of unpredictable factors,
including R&D taking longer than expected, external/internal events and even
potential pivots). Secondly, because it just makes much more sense to avoid
running out of money (which is a well-known #2 reason for startup failure[1])
than to save some equity. What are you going to do with (more) equity of a
failed company? Not to mention that, if a startup's team includes other
people, one of the founders' top priorities should be caring for their fellow
team members (and protecting company is one of the relevant aspects).

[1] [https://www.cbinsights.com/research/startup-failure-
reasons-...](https://www.cbinsights.com/research/startup-failure-reasons-top)

------
mauriziocalo
Relevant PG tweet:

 _> assuming I got in [to YC] I would not get sucked into raising a huge
amount on Demo Day._

 _> I would raise maybe $500k, keep the company small for the first year, work
closely with users to make something amazing, and otherwise stay off SV's
radar. In other words, be the opposite of a scenester._

 _> Ideally I'd get to profitability on that initial $500k. Later I could
raise more, if I felt like it. Or not. But it would be on my terms._

 _> At every point in the company's growth, I'd keep the company as small as I
could. I'd always want people to be surprised how few employees we had. Fewer
employees = lower costs, and less need to turn into a manager._

([https://twitter.com/paulg/status/1132012625527750661](https://twitter.com/paulg/status/1132012625527750661))

Probably a good example of a _confident, competent_ founder ( _Founders who
raise too much capital are acting out of fear rather than acting out of
confidence._ // _Confident, competent founders should take the risk of running
out of money vs. the certainty of over-dilution._ ) as described on this essay
:)

------
TuringNYC
I have not raised recently, but when we tried to raise in 2013, the silliest
thing was the "requirement" to move from NYC to SF/SV. Operating in NYC (as
opposed to SF/SV) alone would allow us to raise less. I'd raise less, but i'd
love to also base myself in a lower C-o-L location than SF/SV.

I hear this isnt as common now, but i'd love to hear fresh stories.

~~~
fra
That seems to be the case less and less.

------
bryanmgreen
I think a lot of what he's talking about boils down to basic communication
issues.

Venture Capital would be helped by a formal renaming of funding rounds.
"Series A" or "Series B" is not indicative of what that money is for. Even
"Seed" doesn't really mean anything these days. It would help clarify
expectations for founders and VC.

~~~
icedchai
Fund round naming is basically a joke. I know a guy who raised "pre-seed"
money because he thought the amount he was looking for was too small to call a
"seed" round. I know another guy on his 4th "seed" round in as many years. The
cumulative value of these seed rounds is more than some series A's in the last
decade.

------
wlesieutre
Didn't HBO's Silicon Valley do a bit about this?

~~~
mattpavelle
[https://www.youtube.com/watch?v=s1w5R2PGCb4](https://www.youtube.com/watch?v=s1w5R2PGCb4)

------
zuhayeer
"How much could you get done in the next 12 months with the amount of capital
you are planning to raise? If you’re a good company, you’re either going to
raise your Series A - or Series B - in the next 12 months or have significant
revenue such that you won’t need more capital"

I think getting to significant revenue such that you won't need more capital
is an underrated approach that seems to be brushed off in the venture world.
It's totally possible – if you really believe your equity is that valuable,
then build something valuable enough to earn some revenue and constantly
reinvest that back into the business to grow.

~~~
threeseed
Great discussion about bootstrapping:

[https://twitter.com/chriscantino/status/1293687510841716736](https://twitter.com/chriscantino/status/1293687510841716736)

------
anurag
As someone who chose to raise only 40% of what was available at the same
terms, the decision seems even better in hindsight.

VC funding comes with expectations for how new capital will be deployed until
the next round, and if you raise a lot in the A but don't have enough progress
to show for it before the B, you're going to be in a tough spot.

So it's not just about dilution; you're reducing your risk for the next round
if you raise less because it's much harder to deploy large amounts of capital
without lowering returns (in this case revenue, customers, and hiring).

~~~
gnicholas
Did you take less from each investor, or cut out some of the interested
investors?

~~~
anurag
Just less money from the lead investor.

------
dustingetz
Huge fundraises are celebrated because it is the only thing simple enough that
anyone can understand (customers, employees, investors and other sheeple whose
attention the founder must compete for).

"Airtable CEO Howie Liu on the continued importance of getting a ‘unicorn’
valuation" [https://techcrunch.com/2019/02/19/airtable-ceo-howie-liu-
on-...](https://techcrunch.com/2019/02/19/airtable-ceo-howie-liu-on-the-
continued-importance-of-getting-a-unicorn-valuation/)

~~~
dustingetz
AH - this is a Schelling Point
[https://en.wikipedia.org/wiki/Focal_point_(game_theory)](https://en.wikipedia.org/wiki/Focal_point_\(game_theory\))

~~~
CrazyStat
Isn't the whole idea of Schelling points that they arise when the parties
can't communicate with each other? Surely there's plenty of communication and
coordination possibilities in investment rounds?

------
fuzzieozzie
Really depends on what you are trying to achieve. VCs are very focused on the
ROI for their fund. A co-founder is generally focused on generating wealth for
themselves.

In the perfect case where the business finds a high growth, product market fit
then VCs and the entrepreneur align. Few businesses fit this model.

As an entrepreneur you have to raise money to suit your business plan (and
risk profile). Personally I prefer my customers to be the boss rather than
investors.

------
davidu
This is great advice that has been ignored for the 16 combined years I've been
fundraising as an entrepreneur and investing as a VC. No reason it'll change
now though hopefully writing about it helps a bit.

One of the great myths in company-building is that increasing runway beyond
24-36 months increases chances of success.

~~~
1cvmask
Would it have changed outcomes for you as an entrepreneur?

~~~
davidu
The only thing I wish I had done differently was reduce dilution, which is
exactly what Aaron mentions here.

------
azinman2
Some things take longer, because they’re harder to do (space, AI) or the
nature of the beast requires length of time outside of your control (selling
to enterprises/gov, bio/pharma trials).

This feels like advice squarely pointed at something like social that’s often
easy to build but hard to get market penetration.

------
picodguyo
"If you’re a good company, you’re either going to raise your Series A - or
Series B - in the next 12 months or have significant revenue such that you
won’t need more capital. If you’re doing badly, why would you want to keep
working on this for 24 or 36 months? That’s a waste of your time."

This black and white view of "good" and "bad" companies is so insulting. Same
with "good" and "bad" founders as referenced in this article and even by PG
elsewhere. How patronizing! I personally know "bad" founders who were running
"bad" companies because they loved and believed in their business, and only 3,
5, or even 10 years into it found the right opportunity and had life-changing
outcomes.

------
101008
Is there any "raise a bit of money to sustain myself with a side project for a
year" in exchange of, I don't know, 50%? Like a partner who will bet that this
side project will be able to sustain two people, while one work on it.
Example:

I want to make a small startup, I need $24k to sustain myself for one year
($2k per month). Someone gives me that in exchange of 50%. The idea is to make
this sideproject to earn $48k per year, so we can both have that $24k anually
after a while.

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luord
As far as the article puts it, raising too much money could be seen as built-
in sunk cost and avoiding that is sound, but other comments have raised valid
justifications for extending runway.

I feel inclined to agree with the article. If I ever have the fortune of
raising money for a startup I created, I would be very unlikely to ask for
money explicitly just to extend the time waiting for it to take off.

PS: Off-topic but I remember that a similar point was raised in Silicon Valley
(the series).

------
dcow
How can you expect to raise money on good terms when you have your back to a
wall and 4 months of runway left? Is the implication that you should fail at
this point rather than try to fix the business? In my experience VCs know
exactly how to leverage the fact that they are patient people and will
patiently wait for you to run out of money before raising on your terms if
your back is to a wall.

------
camhart
Marc Andreessen's comments on raising too much / not enough ring true here.

See
[https://pmarchive.com/guide_to_startups_part6.html](https://pmarchive.com/guide_to_startups_part6.html).

------
hinkley
We know that in general if you have more money you will end up spending it
faster, but has anyone ever tried to quantify this?

If it turned out to be a square root or even a cube root function, I would not
be surprised.

------
yokaze
Just my likely outdated experience from a different country. Another reason to
have a long runway is to avoid having to go through the fundraising process
and rather work on the product.

------
hammock
>Venture capital is designed to speed growth, not to extend runway.

Isn't it a combination of the two? That seems to be the nuance. Just take a
look at YCombinator. Investing in founders, not ideas.

------
koolhead17
Practice what you preach.

------
timwaagh
Why not do a Wework, raise 'more money' if you can find people fool enough to
hand it over. then launder it by having the company buy or lease stuff from
you at inflated prices. In the end the companies success is not really the
goal now is it?

------
LordFast
"Good founders".

I think it's prudent to at least take a minute, step back and examine the
potential cognitive bias going on in one's head when the belief system is
built on something like "there's plenty of food on the table for good people."

~~~
troughway
In this case the word "good" is used synonymously with "profitable" or "on a
trajectory to be profitable". So there is no bias or belief system at work
here. It's a direct correlation.

This entire article is geared towards people who actually have a business that
_can_ make money, and that they should have more faith in their abilities to
make do with less.

