Nivi · October 27th, 2010
We get this question all the time and there’s no right answer. So I started a discussion on Quora to learn more. Here’s my answer:
Raise less if you want to keep your valuation down and keep the option open for an early exit where everyone (investors, employees and founders) makes money.
Raise more if you’re here for the long term and you want to protect your company from poor funding environments or hiccups in your growth. Just try to maintain control, monitor your liquidation preference, and monitor your dilution. Also understand that, if your valuation is high in this round, you will have to make a lot of progress for the next round to be an up round.
In summary, raise too little money and you may go out of business when you run into trouble. Raise too much money and you may make less dough when you exit. Take your pick: disaster vs. dilution.
In either case, try to act like you don’t have a lot of money. The conventional wisdom is that when you have a lot of money, it’s hard not to slow down because you start spending it (which takes time in and of itself) and you start thinking that you have a lot of time left before you die, so what’s the hurry?