Prioritize Revenue Over Investment

Randy Hetrick shares his perspective on fundraising and capital structure based on his experience building TRX. He emphasizes the importance of maintaining control and getting liquidity when taking institutional money.

• Non-Dilutive Capital is Always Best

  • Sales revenue is the cheapest form of capital
  • Preserves ownership and control

• Angel Investors are the Best Source of Early Capital

  • Typically invest on common stock basis
  • Bring domain expertise and passion
  • Often willing to contribute value beyond money
  • Avoid preferred stock structures early on

• Taking Institutional Capital (PE/VC) Changes Everything

  • Introduces preferred share class into cap structure
  • Changes team dynamics and solidarity
  • Creates challenges in maintaining autonomy
  • Makes getting future liquidity more difficult

• Key Lessons on Institutional Capital

  • Pull significant liquidity (minimum 1/3 of holdings) when taking institutional money
  • Get enough liquidity to be "okay if things go differently than expected"
  • Don't wait for subsequent rounds for liquidity
  • Understand that preferences in term sheets can impair control in unexpected ways

• Common Mistakes

  • Not taking money off the table in first institutional round
  • Being too optimistic about future liquidity opportunities
  • Underestimating how long you might be "locked up" with investors
  • Not recognizing how preferences can limit founder autonomy