Fred is explicitly stating that it's good for a business to get new investors, and to not just keep taking money from the existing investors. That's the exact opposite of what a typical VC would tell you. When new investors come into a company, the existing VC gets diluted.
> If a VC went from owning 20% of a company to now own 10% - how is that good for the VC?
Because that's not all that happens. The company also has a bunch more cash which means it's worth more.
You own less of a bigger pie but the actual value of your slice shouldn't change.
If you have 10 out of 100 shares of a company and it has a $10m pre-money valuation, your share of the company is worth $1m.
Now the company raises $2m. The new investors get somewhere between 16 and 20 (newly issued, dilutive shares). Now you have 10 out of 116 - 120 shares. 8.3% - 8.5% of a company worth $12m ($10m + the $2m in cash). Which puts the value of your shares right around your original $1m.
Except now the company has all this cash as well, so you're probably better off.
And not unimportantly: more people whose problem it is if things go South and then one of those might provide a solution acceptable to the remainder or there may be more people to spread the blame. Win win...
Fred is explicitly stating that it's good for a business to get new investors, and to not just keep taking money from the existing investors. That's the exact opposite of what a typical VC would tell you. When new investors come into a company, the existing VC gets diluted.
How is this advice not in the founders interest?