I was speaking with a friend yesterday who recently signed a term sheet to raise a Series B round. While he did not hit it out of the park with the valuation, it was a nice step-up none-the-less and would provide his company with the capital to move forward and stay ahead of its competition. He and I both fully acknowledged that he could have pushed the valuation higher if he spent time with more than two venture firms, but we both agreed that the right thing to do was take the money and build the business. This was an easy decision because fundraising is a distraction and valuation isn’t everything. When you are a lean and mean startup where you are just beginning to build your management team, every second you spend fundraising means more time that you are not working on your business. I have seen too many entrepreneurs go on the VC tour, spend too much time on fundraising, and consequently miss important milestones. In the end, the extensive fundraising process ends up backfiring since the VCs get concerned about lack of progress. So the next time you are faced with the prospect of raising money painlessly and quickly, the slight discount you take on your valuation today will be well worth it in terms of what you can do to build your business and continue innovating your product or service.
Published by Ed Sim
founder boldstart ventures, over 20 years experience seeding and leading first rounds in enterprise startups, @boldstartvc, Saas 2.0, googlization of IT, security, smart data; cherish family time + enjoy lacrosse + hockeyView all posts by Ed Sim →