One of the more common debates I hear from founders that have hit $1 million in annual recurring revenue is around growing faster by raising money vs the tradeoff of more equity dilution. There’s never a right answer and there’s always a spreadsheet scenario to go either way. At Pardot, we debated this for many years and ended up not raising any money (see the Pardot timeline). Here are a few thoughts on the debate:
- Make a personal decision regarding rich or royal
- Build a spreadsheet of the different funding/dilution scenarios (remember to add 10-15% more dilution for each round)
- Know that generally the value multiplier to raise VC money is 5
- Remember that raising money isn’t a successful outcome — it’s one event on a long journey
- Talk to several entrepreneurs that picked different paths and get their feedback
Entrepreneurs love to take calculated risks and raising money to grow faster, or taking it slower and owning more of the company, is a continual debate. Regardless, take the time to understand the different options and make an informed decision.
What else? What are some more thoughts on the debate between growing the business faster vs taking more founder dilution?