The common rational used as a counterpoint (including during my time at YC) was “if taking on $xx million in exchange for 20% of the company increases the value of your equity by more than 20%, it’s a win-win.
The one (major) caveat is that taking on significant funding also means you need to repay all of the amount raised when you sell your company (legally referred to as a 1x liquidation preference).
My main worry for modern day SaaS founders raising giant seed rounds (often $5-10mm) is that after taking that money, you’ve now raised the minimum price you would need to sell the company for you or your employees to financially gain from a sales.
After raising $10mm, if you go and sell for $12mm a year later, the first $10mm goes straight back to your investors, and the left over $2mm goes to whoever owns the shares of the company.
When a startup that raised a $10mm seed goes on to raise a $25mm Series A, the company can no longer sell for less than $35mm (1x liquidation preference to investors).
In other words, we’re seeing a shift of mindset to one of “go big or go home, there’s no middle ground”.
The one exception is sometimes VCs allow founders to take money off the table during large rounds (but of course that often doesn’t trickle down to employees with stock options, etc).
And then there are founders who accept 2x or 3x liquidation preference terms, which double or triple to problem described above.
This is just one of many reasons I favor bootstrapping and reinvesting profits for long-term organic growth rather than short-term VC-fueled hypergrowth.