Founder 1: Runs startup for five years. Sells for ~$100M. Makes $30M.

Founder 2: Running startup for ten years (and counting). Valued at ~$1B. Founder shares valued at $30M.

Which founder would you rather be?

/🧵

There is no easy – or correct – answer to this question. These founders have different life situations and ambitions. However, I don’t think VCs do enough to highlight the financial risks founders take by getting on the fundraising treadmill.

/2

Raising venture capital increases the theoretical value of a startup and the paper wealth of its founders.

It also reduces the number of potential buyers for the startup and increases the risk that no buyer can be found, limiting the real wealth of its founders.

/3

This scenario also assumes that the startup is consistently able to justify its valuation.

It never needs to raise capital on a flat or down valuation and the ultimate buyer pays a premium at sale.

None of these facts are given or believed until “the moment”.

/4

Luckily, not all founders are motivated primarily by money.
That said, most do care about the value of their equity and, ceteris paribus, would prefer to avoid a decade of all-consuming stress if there is not a larger pot of gold at the end of the process.

/5