May 26, 2022

Exclusively for founders They may seem daunting to start-ups, the stock market volatility resulting from this improvement in tech stocks on the public market, and the inevitable impact on private companies’ fundraising. And the geopolitical problems of recent weeks have exacerbated the bleak picture.

As an entrepreneur and venture capitalist who lived through two recessions (the Internet bubble after 2000 and the financial crisis after 2008), I know that entrepreneurial innovation is always alive and that building a business is a marathon, not a race. sprint.

If you are in the early stages, we will first evaluate your team to ensure the product is a pain reliever and not a vitamin.

Here are some of my favorite tips for founders who want to raise capital and build a strong startup.

Capital raised and valuation must be appropriate for the stage of the business

Instead of waiting for the initial phase/Phase A, the founders should remember that there will be multiple funding rounds in the future. It’s easier to go up than down, and your ultimate value lies in building a sustainable business.

Raising too much capital early on can lead to unruly spending, layoffs, and other painful activities as burnout rates skyrocket and future funding becomes scarce.

The list of successful companies that have raised a mid-Round A round is long: Lyft raised $6.2 million; Airbnb raised $7.2 million; Zoom raises $9M; Uber raised $11 million; Confluent raised $6.9 million; Hashicorp raised $10.2 million; Snowflake raised $4.95 million. The list goes on.

These founders understood the value of long term thinking and the importance of building startups with the right values ​​and structure so they can grow into sustainable businesses.

Founder dilution and investor ownership is part of a long game

While founders tend to dissolve, it’s helpful to understand that investors who are committed to working with them feel that the company will raise multiple rounds of capital under their leadership.

As managers of capital received from their limited partners (often pension funds, university endowments, and charities), investors seek to profit and allow them to capture a significant stake in future liquidity events.

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