It makes sense that they’d be tempted to keep their options as open as possible for as long as possible.īut you know what is one of the biggest distractions? Not being able to afford your mortgage, rent, car payment or next shipment of Huel. It makes sense: Opportunities are everywhere and entrepreneurial folks are, well, entrepreneurial. I should have a big red button on my desk that makes a Voice of God shout “FOCUS!” at the startup founders I advise. However, there’s another risk to the company: At an early-stage startup, founders can’t afford to lose focus. At the pre-seed stage, there’s a lot of risk because a lot of things are unknown: Will the product work? Can you find customers? Will they pay for the product? And so on. The entire point of raising money is to go faster and to reduce your company’s risk in stages. As the fundraising climate is shifting, however, I’m hearing more investors suggesting things like “to extend your runway, you should raise from us, but not pay yourself.” That’s literally why you are raising money Now, if this were an isolated incident, I might write it off as a clueless investor. That, ladies and gentlemen, is absolute hogwash. The investor argued that the founders were “working for equity,” and that his investment shouldn’t go to the founding team. He is out there raising money, and he received a term sheet from an investor (yay!), but the investor suggested that the founder and his co-founder shouldn’t be taking a salary. I had a call with a founder I’m advising this morning. Forgive me, but this post will likely be a bit of a rant.
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