I recently watched S02E01 of Silicon Valley.

In it, having demonstrated a breakthrough algorithm, the guys are pursued by investors with increasing funding offers.

However, the founder is warned with a higher valuation, there are higher expectations of performance, and that this may make it harder for to get funding in the future when the company is more mature.

See this Mashable article for a summary of the episode.

Her offer? \$20 million at a \$100 million valuation.

Naturally, Richard jumps at the opportunity, but Monica warns him against taking it to avoid a runaway valuation and potential for a future down round. After some initial resistance, Richard comes around, and decides to make Laurie a counteroffer she can't refuse: \$10 million at a \$50 million valuation.

The question is, is this a genuine dilemma for start ups, or is the rational decision always to 'take as much money as you can'?


I believe this answer is relevant:

In brief, if founders accepted the investor offering at the highest valuation, this investor would be their last one.

But if a startup is looking for money alone, it is a bad startup.

The access to reputable investors (who valuate realistically) gives more opportunities. It includes experienced members of the board, better brand to attract candidate employees, and the track record of closing investment rounds with famous investors.

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