Raising Money, Some Data and Tactical Advice, Letters to Graduating YC Companies, Letter 2

Raising more than 10x at a time can be like putting rocket fuel in your Vespa. If you burn through it then you're probably going to quickly. If you just keep it in the bank then you probably should have raised less.

How can you grow too fast? Growing takes away options and forces you to commit earlier to larger projects. If you're cheap and burning low then you can have multiple shots at the target. If you have a 300k/month burn then you better have the right target in your scope.

Why might it make sense to raise less rather than save it in the bank? There are a few inflection points in the value of a company over time. You release your product, and your valuation goes up 5x. You reach breakeven, the valuation goes up another 3x, etc. You want to time your raising money (and the amounts) so that you get money when it's the cheapest for you.

If it cost $x to reach the recent proof point then it's rare for the cost of the next proof point to be > $(10)x.

Isn't that around what the YouTube guys took on their Series A? I'm sure the circumstances are different for every startup, but raising an inordinate amount of money too quickly probably means you're needlessly diluting yourself. I agree with staying lean, as sometimes raising too much money can breed complacency.