Is it really not possible to bootstrap this or raise through debt? Why do you need $20m to compete in this market?
I wish more companies would avoid taking large outside investment, but maybe that’s unrealistic.
I wish more companies would avoid taking large outside investment, but maybe that’s unrealistic.
As an extreme example, if I thought my company was worth $40m and someone offered $20m in exchange for 10% of my company I would absolutely take that deal whether or not I needed the money.
The problem might not be that the company is taking a deal when they shouldn't. It very well could be that the investors are overpaying. It's also totally possible that this is a good deal if it helps the company get a bigger slice of the market because they can grow quicker.
So instead of continuing to deliver for your current customers and users you start chasing bigger things, and if you’re lucky it works, if not you fail and your company burns all the cash in a couple of years and files for bankruptcy.
To me, a Series A investment is about bringing on more supporters for the business. Redpoint led our round and they've also been investors in companies we admire: HashiCorp, Zendesk, and Twilio.
I'm excited to have their help to deliver more value, more quickly to our users and customers.
While I think it's possible to build a great company without significant outside funding (e.g. Valve), I think it's more rare, therefore higher risk.