With venture backed startups, its likely the company will need to raise additional capital after a seed or Series A financing. There have been exceptions for sure but that is the most likely outcome, typically be design.
I’ve encouraged founders to work backwards as a method to manage runway.
One thing I wanted to point out this morning is how often a founder will raise less money in a financing than is available or being offered. They don’t love the amount of dilution happening, they can’t justify a higher valuation so end result less capital to protect ownership. I see it all the time.
I can’t blame them. It can be jarring to see 15-25% of your equity going into investors hands.
But in my experience, and in most cases things don’t go as planned. And while I’m proud of our investments with our first three funds having multiple returns, we have seen more than our share of startups that wish they had more runway. I would easily say the majority wish they had more runway.
I realize this may sound self serving as an investor (e.g. “sell us more of your company”) All I can offer is my opinion and observation after seeing this in 80+ startups in our family of companies and many more companies we haven’t invested in.
Threading the needle rarely works.
I’ll end this post with one more piece of unsolicited advice :)
Raising more money doesn’t mean you have to necessarily deploy it any faster.