investorsA company is bring in a VC for their series A round. The company has yet to have a valuation. Seed/angel round was convertible bridge loan. Founder does not want the VC to fill the entire Series A round of $8MM, but wants VC to fill only $5MM. Why?
Off the top of my head, this could be for three reasons mostly:
Perhaps, if they’re confident that they can make do with only $5M, they want to retain more control of their own company by not diluting more than they need to.
More often, VC money comes with all sorts of strings attached. Chief among them is not leaving the newly raised money in the bank for rainy days: founders are expected to spend it - fast. This would typically get spent by hiring more staff, and that can lead to companies growing too fast for their own good, and imploding down the road.
One specific edge-case related to the latter is when a founder is intellectually honest enough to recognize that they don’t have a product market fit yet (as in: a confidently profitable one under the assumption that economies of scale kick in after you pour enough money towards growing your user base). In this case they’re actually looking for a second round of exploratory money (as in seed+ money), rather than a big lump sum to put growth on steroids.
Difficult to know without speaking to the founders.
The reasons I can think of:
All content is licensed under CC BY-SA 3.0.