You always spend the money

Extra cash never sits in escrow

Every time a founder get talked into raising more than they need, they say they won’t touch the extra money. "It'll just be there in case we need it but we'll stay disciplined." But the money never sits in escrow. 

You're creative and ambitious - you'll find ways to spend the "extra" money. 

You’ll say yes to hires, marketing campaigns, or product experiments you otherwise wouldn’t have. You’ll talk yourself/get talked into ideas. You’ll burn hotter, faster and the timeline to your next raise won't change - just the expectations for what you'll have to accomplish by then. 

It’s so rare to not spend everything you raise that the one time it actually happened is a famous story; eBay stayed super disciplined (and profitable) and never spent their Series A. 

eBay only raised the round for operating/recruiting support and literally kept the money in a separate bank account. But this never happens. 

So if you raise it, you’ll spend it. And if you don’t have a plan to spend it efficiently, you’ll spend it inefficiently. 

You’ll sell a piece of your company just to pour money into the ground. 

Raising money is only dilutive when the value creation/return on capital is less than the cost of capital. And early venture capital is expensive. If there's great opportunities to spend against with a team and plan to do it well, more money is great. If not, it’s an albatross. 

So even if the money seems “cheap” because your valuation is high, taking money you can’t spend well is dilutive and destructive to founders.

I Wrote

• If you raise it, you’ll spend it. 

• When buyouts make sense for venture

• Epochal talent movements - oldie but making the rounds again

I Read

• When is Fragmentation an Opportunity, and When is it a Warning Sign? - The Diff 

• Can the Media Survive? - New York Mag

• How elderly dementia patients are unwittingly fueling political campaigns - CNN 

I Watched

• High Maintenance. It really holds up!

• The Night Manager