"More capital does not make for better businesses." – Eric Paley
Most people even in the startup world don’t know who Eric Paley is. Let’s hope that a couple of influential Techcrunch pieces and his entry into the 2020 Midas List will correct that.
Paley is a Founder of US East Coast-based seed-stage fund Founder Collective, famous for an early ticket in Uber and its no-nonsense stance against raising too much funding.
In a Techcrunch article published two years before the current crisis began, Paley was warning Founders against taking too much money too early.
Drawing on real-life examples, he compares the fates of Zappos vs. Wayfair (“Who?” – point made) and TrueCar vs. CarGurus to prove you can be better off as a Founder if you raise money after your company is already on track thanks to what Paley calls “efficient entrepreneurship.”
After analyzing data from dozens of startups that went public, he concludes:
“Raising less money or money later doesn’t just lead to better companies, it leads to richer founders.”
No doubt many Founders will find these words soothing in these capital-stricken times.
Maybe it’s the best thing that’s happened to them: focus on getting clients vs. VC money.
Do you know other successful companies that raised VC money late? How did they survive long enough?
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You can read the Techcrunch article “When Venture Capital becomes Vanity Capital” here
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