So you want to raise $50M…

A few thoughts and questions to ask before you raise that big growth round

By Micah Rosenbloom, Managing Partner

🍻 Resist peer pressure to raise

You’ll find *a lot* of encouragement to raise a big round if it is remotely possible — your investors want the mark, and your employees will love the paper wealth. Still, it’s the highest-risk path of least resistance you’ll ever walk down.

❓ Ask why you are raising

If you can predictably turn $1 in $2+ go for it, raise.

💸 Make peace with selling your $500M exit options

If you’re raising $50M, you’ll likely have a $250-$300M valuation. A $250M+ valuation is an agreement, implicitly, that you will probably sell the company for no less than $500M. That’s not so easy!

🐞 Consider a smaller round

Raising a smaller round can be surprisingly hard because of how VC firms are structured, but it’s often the better move for the company. Use the power your momentum provides to raise a smaller amount and preserve some optionality.

🌐 Look for strategic investment

You might be able to get more flexible terms from a strategic partner rather than a purely financial fund. This arrangement comes with its own risks, but it creates a BATNA that can cajole traditional VCs if nothing else.

💳 Evaluate debt

Some founders use equity funding to fund inventory or smooth out a slow cash conversion cycle when debt would be a less risky and non-dilutive alternative.

🤔 “Steelman” the alternate case

Seek out a trusted advisor who can make a strenuous case for why raising a growth round doesn’t make sense. You don’t have to listen to follow their advice, but be sure you understand their argument before taking on the capital.

🤝 Build relationships with potential acquirers

If you aren’t 100% sure whether to take the round, it’s always good to at least consider M&A. Selling now might be better for the company — and your finances — than raising a high stakes round of funding.

Our mission is to be the most aligned VC for founders at seed. #ProudInvestor in @Uber @TheTradeDeskinc @Buzzfeed @Cruise @Diaandco @PillPack @SeatGeek & more.