December 1st
Debt
I don’t understand this perception of success when a company raises capital. Announcing a raise usually results in comments like, “congratulations!” and “you did it!” What they should be saying is “good luck.”
Let’s call it what it is: debt. Debt is not ideal, and I think the perception among tech startups is that when you raise capital, you’ve “made it.” Don’t get me wrong, raising debt means you get to scale faster, hire those crucial employees and see if your business idea really has merit; that’s a good thing. But really, you’re on step 1 of 100. When you raise a round, it means you’d better not mess it up.
Here’s an example: Let’s say a company recently announced a $30mm Series C. They made it! They’re killing it! Not exactly. They’re still cash flow negative and raised a down round, giving up more equity at a lower valuation, so they could stay afloat and survive just a bit longer. As an entrepreneur, that’s a terrible situation to be in. But this is just a hypothetical situation, right? Some recent news stories prove otherwise.
In short, raising capital does not mean that you’re done, that you made it, that you’re successful. Our perceptions should align with that.
