Questions

With government programs and founders bootstrapping, we are pretty sustainable and only need a short term bridge loan to get us through the year. We are however, looking to raise seed money to help us accelerate growth. A VC that we are in discussions with stated they do a minimum of $400,000 in seed round. Our cashflow projection does not require that amount of money at this point, even in the worst case scenario. Should we do a smaller deal instead of going for that round, which would dilute us significantly at this stage of our startup. Or should we raise enough money for the next 2 years?

You can certainly raise too much.

Although, I tend to not look at this question from the standpoint of dilution, as much as the impact of too much cash on a startup.

One of the things that makes a startup successful is that it is literally fighting for its life. This helps ensure that resources are used efficiently and only essential investment are made.

The availability of too much cash can lead to people becoming complacent and losing the required sense of urgency required in a startup.

Having said that everything is relative. If you need $300K and raise $400K that is not a bad idea, because it always goes quicker than you expect. However, if you need $300K and raise $2MM that is definitely not a good idea.


Answered 9 years ago

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