Founder at Twig Ventures | Adjunct professor at UW Foster | Material Change Fellow | Director, Founder Institute-Seattle
During a session on funding methods at Creative Destruction Lab Super Session today, the presenter asked what the audience believed is the chief motivation for VCs. One founder quipped that it's raising their next fund. I actually think this is a brilliant observation. Here's an example: a founder raises a good series A and sees a path to profitability without raising again. It'll be a little slower but ultimately more sustainable and a better exit for early investors. But... The series A lead is raising their second fund and needs to show a positive track record. With no exits yet, that track record will be built on the back of portfolio company markups, which can't happen without new, higher valuations from subsequent rounds. So we have a conflict of interest that can lead to substantial friction, and possibly serious problems for the founder if they don't still have a majority stake. Food for thought for founders.
During an investor speed dating event recently, I was told in no uncertain terms by one investor that a plan for a sustainable, profitable business that didn't *require* constant fundraising "would scare off any good investors that have real money."
Head of Product and GM of Justice @ Axon | Start-up investor and mentor | Working to help solve society's biggest problems through technology & entrepreneurship
2wLevi Reed have you chatted with Benjamin Hallen about his research on the "Mighty Middle" yet?