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It’s Exit Ownership - Not Entry Price - That Matters.
Entry Price (low for investors, high for founders) is just a hedge against dilution and inefficient growth.
Pre/seed investors are obsessed with “low” entry prices as the way to make money. And founders are myopically focussed on “good” (high) valuations to minimize dilution. But investors and founders *should* care about business model quality, not entry price.
It’s exit ownership, not entry price that drives returns/wealth.
You can do things “cheaply” (low entry price) but if you get diluted to hell you still won’t make money on the exit.
And, counterintuitively, founders shouldn’t care about entry price either. The only reason to care about a “good” headline valuation for pre/seed is if you expect to run a deeply inefficient, unprofitable business. Only founders who can’t run an efficient company - and will therefore raise a ton - need to maximize early ownership
The real way you’ll make money is owning a lot at exit which you do (if you’re not multistage and buying up) by investing in and starting/running capital efficient businesses that won’t dilute you a ton.
Businesses that don’t need huge amounts of capital to get going and/or can run profitability/efficiently will produce much better outcomes than companies you enter at a bargain (for VCs buying cheaply, for founders raising at high prices).
So backing and running capital efficient businesses is not about being able to tell downstream investors to fuck off or exempt ourselves from the Series A market; it’s about maximizing exit ownership so that a “win” actually counts for something.
Ty Angele and Ayo for your read.
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