Just closed more funding? My condolences.
by Ben Orenstein
When a popular company announces a new round of funding, the Hacker News comment threads are usually overwhelmingly congratulatory. This attitude is horribly misguided. In my eyes, announcing post-seed funding is a BAD thing, and should be close to a PR disaster. The HN threads should be full of condolences. Here’s why.
The company hasn’t figured out how to pay its bills
At the end of the day, a company exists to make money. Every round of funding (past, maybe, a seed round) is an admission that you still haven’t figured out a business model that will keep the damn lights on. Every startup should want each round of funding to be its last.
The founders have ceded control
Companies in very strong positions are sometimes able to take funding without losing much control of the company, but this is rare. In general, founders are turning over substantial control to professional gamblers with horrible succes rates. A VC will never love your company like you do; he’s there only to get paid. This will forever taint your relationship.
Part of the company was sold prematurely
People seem to forget that “getting funded” really means “selling part of the store”. If you think your company is going to be worth more in the future, why are you selling part of it now?
Here’s an announcement I’d love to congratulate: “we’ve recently reached profitability and know we can keep the lights on. We think we can make even more money in the future, so we’re going to hang on to as much precious equity as we can. Offers for outside funding are flattering but unnecessary.”