Kleiner Perkins recently hosted a podcast where its partners Eric Feng and Randy Komisar talk about fundraising do’s and don’ts.
If I had to summarize the podcast’s recommendations for fundraising in a single sentence, it’s to optimize for success. What this means depends on the company and the context.
Sometimes it means taking a few additional points of dilution to get the right partner in your company. This may be a specific partner with the right domain expertise or a fund with deep pockets. Sometimes it means taking the offer with the highest valuation among those with the absence of adverse downside protection terms if your business is already moving full steam ahead and you don’t need much help from investors. Sometimes it means taking a down round and, if necessary, recapitalizing the company to make it easier to fundraise in the future.
It’s tempting to optimize for variables other than success. Sometimes you have to make mistakes like optimizing for valuation when you should be picking the right partner, or not taking a down round when you need to in order to learn that these aren’t the right approaches. But, if you can, I encourage you to internalize this message. Life’s too short to make and learn from every possible mistake yourself.
Also published on Medium.