Sitemaps
Let's Get Back to Our Why
Does Startup Success Validate Us Personally?
How We Secretly Lose Control of Our Startups
Should Kids Follow in Our Founder Footsteps?
The Evolution of Entry Level Workers
Assume Everyone Will Leave in Year One
Stop Listening to Investors
Was Mortgaging My Life Worth it?
What's My Startup Worth in an Acquisition?
When Our Ambition is Our Enemy
Are Startups in a "Silent Recession"?
The 5 Types of Startup Funding
What Is Startup Funding?
Do Founders Deserve Their Profit?
Michelle Glauser on Diversity and Inclusion
The Utter STUPIDITY of "Risking it All"
Committees Are Where Progress Goes to Die
More Money (Really Means) More Problems
Why Most Founders Don't Get Rich
Investors will be Obsolete
Why is a Founder so Hard to Replace?
We Can't Grow by Saying "No"
Do People Really Want Me to Succeed?
Is the Problem the Player or the Coach?
Will Investors Bail Me Out?
The Value of Actually Getting Paid
Why do Founders Suck at Asking for Help?
Wait a Minute before Giving Away Equity
You Only Think You Work Hard
SMALL is the New Big — Embracing Efficiency in the Age of AI
The 9 Best Growth Agencies for Startups
This is BOOTSTRAPPED — 3 Strategies to Build Your Startup Without Funding
Never Share Your Net Worth
A Steady Hand in the Middle of the Storm
Risk it All vs Steady Paycheck
How About a Startup that Just Makes Money?
How to Recruit a Rockstar Advisor
Why Having Zero Experience is a Huge Asset
My Competitor Got Funded — Am I Screwed?
The Hidden Treasure of Failed Startups
If It Makes Money, It Makes Sense
Why do VCs Keep Giving Failed Founders Money?
$10K Per Month isn't Just Revenue — It's Life Support
The Ridiculous Spectrum of Investor Feedback
Startup CEOs Aren't Really CEOs
Series A, B, C, D, and E Funding: How It Works
Best Pitch Decks Ever: The Most Successful Fundraising Pitches You Need to Know
When to Raise Funds
Why Aren't Investors Responding to Me?
Should I Regret Not Raising Capital?
Unemployment Cases — Why I LOOOOOVE To Win Them So Much.
How Much to Pay Yourself
Heat-Seeking Missile: WePay’s Journey to Product-Market Fit — Interview with Rich Aberman, Co-Founder of Wepay
The R&D technique for startups: Rip off & Duplicate
Why Some Startups Win.
Chapter #1: First Steps To Validate Your Business Idea
Product Users, Not Ideas, Will Determine Your Startup’s Fate
Drop Your Free Tier
Your Advisors Are Probably Wrong
Growth Isn't Always Good
How to Shut Down Gracefully
How Does My Startup Get Acquired?
Can Entrepreneurship Be Taught?
How to Pick the Wrong Co-Founder
Staying Small While Going Big
Investors are NOT on Our Side of the Table
Who am I Really Competing Against?
Why Can't Founders Replace Themselves?
Actually, We Have Plenty of Time
Quitting vs Letting Go
How Startups Actually Get Bought
What if I'm Building the Wrong Product?
Are Founders Driven by Fear or Greed?
Why I'm Either Working or Feeling Guilty
Startup Financial Assumptions
Why Every Kid Should be a Startup Founder
We Only Have to be Right Once
If a Startup Sinks, Founders Go Down With it
Founder Success: We Need a Strict Definition of Personal Success
Is Quiet Quitting a Problem at Startup Companies?
Founder Exits are Hard Work and Good Fortune, Not "Good Luck"
Finalizing Startup Projections
All Founders are Beloved In Good Times
Our Startup Culture of Entitlement
The Bullshit Case for Raising Capital
How do We Manage Our Founder Flaws?
What If my plan for retirement is "never retire"?
Startup Failure is just One Chapter in Founder Life
6 Similarities between Startup Founders and Pro Athletes
All Founders Make Bad Decisions — and That's OK
Startup Board Negotiations: How do I tell the board I need a new deal?
Founder Sacrifice — At What Point Have I Gone Too Far?
Youth Entrepreneurship: Can Middle Schoolers be Founders?
Living the Founder Legend Isn't so Fun
Why Do VC Funded Startups Love "Fake Growth?"
How Should I Share My Wealth with Family?
How Many Deaths Can a Startup Survive?
This is Probably Your Last Success
Why Do We Still Have Full-Time Employees?
The Case Against Full Transparency

Funding is a One Way Street

Wil Schroter

Funding is a One Way Street

Raising money isn't just about getting some cash in the bank, it's about committing to a very different path to building our startup.

And there's sorta no going back.

What no one told us going into the capital-raising game was that once we take money from investors, we're basically locked into a handful of outcomes, but more importantly, we're locked out of a few that we're probably going to want back!

We Significantly Limit our Potential Outcomes

When we're looking to raise capital, we're all thinking the same thing "We need more money to grow!" which of course makes sense. What we miss, however, is that taking on investors might increase the potential of our upside, but often comes at the cost of limiting other potential options that could be really meaningful to us as Founders.

The most obvious is that investors need a return on that money. Therefore, we've limited the number of "smaller" outcomes that might work great for us, but not for them. For example, maybe a few years in, someone wants to buy our small startup for a nice $5 million check. That could be an amazing windfall for us personally and potentially have life-changing effects.

But that's not what investors may be looking for, and if so, they may "ask" (without asking) us to keep pushing for a bigger outcome. Not because it's the best thing for us, but because it's the best thing for them. To be fair to investors, that was their goal from outset, it just severely limits the number of outcomes that benefit us personally.

We Get a Boss — For Life

When it comes to who really controls the company, forget about "who owns majority." That's irrelevant. What matters is the Golden Rule — "She who has the gold, rules."

In this case, we're living off of our investor cash, which means their desires are what really matter. Yes, we can go another direction with the company, but the moment we need capital - if investors aren't satisfied — we lose. The only real way to have control of a company is to control the bank account, or at the very least — profits.

We can negotiate certain provisions and rights into the investment to give us the air of control, but absolute control means doing anything without asking permission. The moment we have to ask permission - we have a boss.

It's not "Our Company" Anymore

Perhaps one of the most painful lessons we learn after raising capital is that for the firs time, it's no longer "our company." In the same way, having a roommate doesn't make it "my apartment." From this point forward, and again, never going backward, we now have someone else to contend with - or in some cases - many other people to contend with.

At first, this sounds like a sign of relief "Oh great! Now these lovely people will join this journey with me!" and we feel supported and validated. But that pixie dust wears off very quickly, and in its aftermath, we find out that we just have a bunch of roommates hanging around - for life.

These investor roommates have the potential to be helpful, but in reality, they just turn into one more liability we have to stay on top of. Even long past the point where their money has run out, they are never, ever leaving the house!

We Just Need to Know What We're Signing Up For

It's not that raising money is bad - plenty of companies do it. It's that as Founders we have to understand what we're signing up for. We have to be able to confidently look at our "new path" and say "This is what I think is best" while also looking at the alternate path (control) and saying 'I'm willing to give that up." The problem is we can't have both.

So long as we are 100% on board with the new path, and don't look back, we can confidently feel like it's the right decision.

In Case You Missed It

Will Investors Want to Run My Company? If I take on investors, will they push me aside and run the company?

What Should I Never Say to an Investor? I'm going to be raising capital for the first time — I know what I want to tell investors, but what should I avoid saying altogether?

Can I Have a Boss Again? (podcast) As a Founder, what happens when we're forced into going back to reporting to someone else now that we've tasted the freedom of Founderhood?

Find this article helpful?

This is just a small sample! Register to unlock our in-depth courses, hundreds of video courses, and a library of playbooks and articles to grow your startup fast. Let us Let us show you!

Submission confirms agreement to our Terms of Service and Privacy Policy.

Already a member? Login

No comments yet.

Start a Membership to join the discussion.

Already a member? Login

Create Free Account