Understanding the questions behind a VC’s questions: Part 2 — How deep is the hole?
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This is the second in a series. To see part 1, What the F is “fit?” please go here. How deep is the hole? one quetsion before I jump…How far down is it?”] Early stage investing is about the excitement generated by a big idea in a big market being built by a great team. But it is also about understanding how much capital the company will require over its life and what this means for the value of the current investment in terms of dilution (or required follow-on to avoid dilution). These questions also helps set reasonable expectations for the entrepreneur’s ability to de-risk the business with the current financing. For example, a business currently raising 10% of its total projected capital needs may not be able to significantly de-risk the business prior to raising additional capital and may want to think about getting a little more runway to be able to make more progress before raising more money.
Understanding the questions behind a VC’s questions: Part 2 — How deep is the hole?
Understanding the questions behind a VC’s…
Understanding the questions behind a VC’s questions: Part 2 — How deep is the hole?
This is the second in a series. To see part 1, What the F is “fit?” please go here. How deep is the hole? one quetsion before I jump…How far down is it?”] Early stage investing is about the excitement generated by a big idea in a big market being built by a great team. But it is also about understanding how much capital the company will require over its life and what this means for the value of the current investment in terms of dilution (or required follow-on to avoid dilution). These questions also helps set reasonable expectations for the entrepreneur’s ability to de-risk the business with the current financing. For example, a business currently raising 10% of its total projected capital needs may not be able to significantly de-risk the business prior to raising additional capital and may want to think about getting a little more runway to be able to make more progress before raising more money.