Sitemaps
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
Should I Feel Guilty for Failing?
Always Take Money off the Table

The Risk of Trading Vulnerability for Opportunity

Wil Schroter

The Risk of Trading Vulnerability for Opportunity

The most expensive time to raise capital is when we're most vulnerable.

This paradox is the heart and soul of where we get leveraged as Founders, particularly when we're giving up valuable equity. What we need to do in those vulnerable moments is step back and ask ourselves "Is this the best possible time to take on dilution or can we find a way forward that costs us less later?"

If we've never built a startup before, we may not even realize how important this question is. For those of us that have, we're hyper-aware of how badly we get beat up in our previous startup by not being more mindful of protecting ourselves when we were most vulnerable.

Our goal then should be identifying our moments of vulnerability and crafting a more viable path toward minimizing the cost.

Time is (Expensive) Money

More often than not, we're raising capital because we want to accelerate time. Whether we want to hire some more developers, increase marketing spend, or just have enough cash to quit our day jobs, we're trying to speed something up.

We justify that acceleration by saying things like "Well if I don't raise this money the product will never launch!" or "If I don't capture this market my competition will!" and there is some truth to that, but far less than we tend to imagine.


Our approach should be "Raising money is our last resort at this stage because it will be preposterously expensive compared to when we need it later — so what can we do to avoid raising money?" In case we forget in this moment, the majority of businesses don't raise professional capital in their formative years, so let's not pretend it's "necessary" and call it what it is "opportunistic."

Co-Founders are Exponentially Costly

While time can be expensive, Co-Founders are most certainly expensive. Think about the relative cost of adding a Co-Founder. At the time we think "Well I don't want to do this alone! Having a Co-Founder would make this work much easier, divide the labor, and spread out some of my startup costs!" And all of that is true, but it overlooks one very important thing - the cost of that help.

Often, we decide to split out equity 50/50 because in our minds it's "free" and "fair" — except when we start to play out a little math. Imagine we were to go it alone for another year, and that point had a basic version of the product, a few early customers, and some investors interested in our deal. Would we still be looking to give an equal share to someone else? Probably not.

What we're saying, then, is that we're willing to make the single most expensive equity decision we would ever make simply because we made it at the time we're most vulnerable. Our vulnerability, of not wanting to "go it alone for the next year," will cost us more than any other equity raise or company expense we'll make for the rest of our lives. In many cases, we would be better served to take the idea as far as we can, recognizing that every additional step we make could yield us a lifetime of more equity.

(Too) Early Investors can be a Bad ROI

Raising capital too early is another sign of exploiting our own vulnerability, especially if we spend that money on things that could have been done without it. Imagine an investor that puts in $50k to our super early-stage startup. At the time it feels like all the money in the world (because we have zero) but holy cow will we likely regret it.

In the startup world, even at its most efficient, $50k doesn't get us very far. It certainly doesn't sustain salaries, it can't be used to develop a meaningful marketing campaign, and it's almost impossible to create a return on it. Instead, it usually evaporates into a tiny retainer for a few contractors, some legal fees, and that one Google campaign that we tried and it didn't work out.

The problem isn't the $50k — it's when we took it. An early $50k can cost us as much as 5-10% of our company, which will be forever a meaningful chunk, but because we took the money so early, what we'll get for it will almost certainly not be meaningful long term. When we take the money is more important than how much we take.

In our formative years, it's incredibly prudent to recognize how exponentially expensive our equity decisions are and do everything in our power to reduce our vulnerability, take our time, and hold on to that crazy valuable stock.

In Case You Missed It

How Relationships Change When You're Successful. As our success grows, our relationships will change. It’s inevitable. What can we expect will happen when for the first time our “wealth” changes the dynamic of our relationships with friends and family?

How We Built an 8-Figure Business by Saying “No” We always hear about brazen Founders making big bets on the future — the big "Yes!" But what about saying "No"? You guys at Startups.com talk about how often you say "No" — how did that help you build a successful company?

How Do We Create Career Paths Within Startups? (podcast) Want to get your best employees to stick around? Listen in for tips on expanding careers without the hierarchy.

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