Founder's Log #4: Maybe we don't have funding?

Fundraising is a lot of work. We were lucky enough to have investors come to us instead of us having to look for investors. But still, going through term sheets, untangling the legal wording, negotiating terms, it all takes time. The time we could be spending on product build.

For the past few days we’ve been negotiating the terms set by the lead investor. We’ve managed to find an agreement on all the terms but one, the valuation. At this stage the valuation doesn’t mean anything and I’m not previous about it. What I’m precious about is how much equity we are willing to part with in return for the investment.

As founders our equity can only dilute, so it’s important for us to not give away equity when it isn’t absolutely necessary. Whereas investors can increase their share of equity in subsequent funding rounds.

We are pre-PMF, so from investor’s perspective they are making a bet on the founders and there’s a risk that the business might not even exist in 12 months time. I can understand that. But isn’t the risk of investors losing their money the same regardless of today’s valuation?

Last year we decided to bootstrap, which is still a possibility. We aren’t running out of cash and have runway for a year. But having investment opens up more possibilities and enables us to do more experiments faster and potentially identify PMF sooner.

It’s a dilemma.

I’ve had a long and hard conversation with my co-founder, Billy. We are ready to walk away from this investment if we can’t agree on favourable terms.