

There are only two things a rational entrepreneur does in a hot market: sell or raise money - staunch
http://www.calacanis.com/2007/07/09/should-you-raise-a-lot-of-money-or-not-hint-listen-to-success/
Be sure to read comment #5 from Marc Andreesen.

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pg
He's wrong. The danger of a high valuation is not just that it will make you
spend more. The danger is that it precludes small exits, and thus most exits.

I'm with Liew and Kopelman on this one. And YC can't be accused of taking the
VCs' side, because in series A rounds we're in the same position as founders.
I would rather get diluted by a low valuation than have a company take money
at such a high one that there's no room for error.

~~~
epi0Bauqu
Yeah, not only does it prevent most exits, but it also realistically prevents
you from passing through all the income to the founders. Investors aren't
going to sit around and let you do that; usually they are going to basically
insist you put most of the profits back into the business, probably by hiring
more people.

By the article's logic you should have a CEO that spends all their time trying
raise money, thus living up to the raise as much as you can mantra. That is
just ridiculous advice for an Internet startup that can (a) be run to tens of
millions of users by a handful of people on little money and (b) is often in a
situation where having more capital won't help acquire users. Additionally,
raising money is usually a huge distraction, significantly dilutes your
equity, and generally makes the dynamics of your business more complicated
(dealing with the new investors who are probably now on your board). You
really should only go through this process is you have a very specific need
and plan for the money.

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staunch
Be sure to catch Marc Andreesen's comment (#5) (tried to add that to text
field post-submission)

I love this topic because smart and experienced people seem disagree. My
feeling is that the situation is simply different for Marc and Jason. Both of
them are already rich, so they're comfortable aiming for IPOs/billion-dollar
exits or bust -- just like VCs.

