Good morning 👋
As of time of writing, there were no interesting VC headlines for me to give my two cents on.
So instead, I’m giving my two cents on this post on all of the downsides to raising “extra” money.
Let me know what you think of today’s piece in the poll section at the bottom.
P.S. 💰 Are you a full-time investor AND do you want to get paid more?
Today’s highlights
Why more more means more problems for most founders
The most practical skill you’ll learn
Google keeps betting big on self-driving
Meme of the day: Do VCs actually help with recruiting?
TOP
VC bladder theory 👋
There’s so much wisdom in this post I had to share this instead of giving a recap of the news of the day.
We’ve seen the same story in VC over and over again:
A company gets discovered
They take on more capital than they need
They don’t have a plan for putting that capital to work
They burn through that capital through a series of marketing ideas, product experiments, and unnecessary hires
They become unprofitable / beholden to investors
The more money you have, the easier it is to spend it.
That’s the same principle as the bladder theory of corporate finance. The Bible also has something to say about it.
"Whoever loves money never has enough; whoever loves wealth is never satisfied with their income".
But VC prioritizes growth-at-all-costs, and most founders don’t have experience holding millions of dollars in the bank, so what are you supposed to do?
At the end of the day, how the funds are spent is up to the founding team, but investors can (and should) develop a plan to make spending decisions more clear. Financial models are good here.
I would argue strongly that the spending model should be created and revised at least 1-2x before is spent.
The best line from this post is “Capital is only dilutive when the value creation is less than the cost of capital.”
If only that could be plastered on the wall of every founders’ office …
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LINKS
💡 20 Ideas from Edwin Land’s Biography: Edwin Land was the founder of Polaroid and Steve Job’s hero
🤕 It’s Not Prioritization Until It Hurts: The Hard Parts of Growth believes blocking time on the calendar for the big goals results in delegating the smaller ideas that don’t make the calendar
🤝 How to Find a Cofounder Guide: Guillermo Flor from Product Market Fit delivers the cofounder guide that not only explains the benefits of having a cofounder, but what to look for, where to to, how to test and examples of successful cofounder relationships
💷 Venture Capital Compensation in Europe—Part I: Learning VC reports on the results of the latest salary trends across 23 European countries
🤖 AI Bots & Memecoins: Marc Andreessen and Ben Horowitz discuss an unusual intersection of AI bots and crypto
TWEET
HEADLINES
SEC Sends a Message to Startups About ‘Fake It’ Culture (WSJ)
KdT Ventures Nabs Over $100 Million for Early-Stage Investments (WSJ)
Remote ropes in Carta to simplify equity grants for distributed teams (TechCrunch)
Waymo Closes $5.6 Billion Funding From Alphabet, Others (Bloomberg)
MEME
RECS
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POLL
Do you create some sort of financial model to help founders plan how they should spend their cash?
Thanks for reading this far and giving us a little bit of your attention this week.
Feel free to unsubscribe whenever this stops becoming valuable to you.
- Clay
RESULTS
Here are the results from our poll question in yesterday’s piece:
If you were a founder picking a VC, what would matter most to you?
🟨⬜️⬜️⬜️⬜️⬜️ Flexible financing options (no strict equity targets) (2)
🟩🟩🟩🟩🟩🟩 Supreme distribution channels / support (8)
⬜️⬜️⬜️⬜️⬜️⬜️ Ability to connect to top talent (1)
🟨⬜️⬜️⬜️⬜️⬜️ Something else (2)
🟨🟨🟨🟨⬜️⬜️ Just show me the answers (6)
19 Votes
