Fundraising Size Determines Path

A framework for understanding how much funding to raise for your startup and the implications of different raise amounts on exit optionality.

Core Fundraising Philosophy

• Raising under $2M maintains maximum optionality for exits
• Over $10M in funding commits you to pursuing $1B+ exit
• Social contract between investors and founders has "broken down" in recent years
• Taking investor money creates moral obligation to generate returns

Fundraising Tiers & Implications

Under $2M Raise

• Maintains full optionality for smaller exits ($10-50M)
• Only real cost is dilution
• Allows for hiring key early employees
• Everyone stays "chill" about exit expectations
• Good for founders prioritizing wealth creation in 5-10 year timeframe

$2-10M Raise

• Start losing optionality but still maintain some flexibility
• Higher expectations but not yet committed to unicorn path
• Can still exit for less than $1B if opportunity arises

Over $10M Raise

• Commits company to pursuing $1B+ exit
• No optionality for smaller exits
• Creates addiction to burning more money
• Investors become less "chill" about smaller outcomes
• Only raise if you "feel it in your bones" that $1B+ is possible

Key Considerations

• Use funding to hire good people, not pay yourself
• Most founders need some capital vs pure bootstrapping
• Being "one and done" with fundraising ($500K-2M total) can be optimal
• Raising nothing often happens because founders can't raise vs choice
• Consider your personal wealth creation timeline goals when deciding

Warning Signs

• Founders treating VC money as "free" with no obligations
• Losing sight of moral obligation to return investor capital
• Raising too much too early and getting locked into unicorn path
• Not having clear path to $1B+ when raising over $10M