Elad Gil argues that many founders raise venture capital when they would be better off bootstrapping, citing historical and recent examples of companies that succeeded without outside funding (Zapier, SurveyMonkey, Notion, Dell) and cases where fundraising led to destructive scaling (early-2010s social gaming firms). He acknowledges legitimate reasons to raise (to accelerate growth or buy infrastructure) but says the default advice from VCs encourages unnecessary dilution and loss of control. The segment mixes concrete anecdotes with prescriptive advice: founders should question the impulse to raise if the business is profitable or easily scaled.
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I think every market cycle has a mid journey style company that bootstraps. And so I don't think anything is different with AI. And I think in that case you had a founder who previously had started a company that raised a lot of venture capital. And it's possible the mid journey model is being driven by the fact that that had happened. I think in general, we've now long had a history of small teams being able to build giant things. Zapier only ever raised a seed round and then never raised again. SurveyMonkey never raised external money until quite late. Notion was profitable for a huge chunk of its existence in terms of not fundraising because it was profitable on average. I think too many founders actually raise money when they shouldn't. Yes, I agree with that and I think the venture community's incentive is to tell them the opposite. But the reality is if you have a rapidly going profitable company, why would you dilute? Microsoft actually famously only took money because I think Ballmer or somebody went to business school with somebody at some venture fund and that person convinced him to take money right before the ipo or Dell bootstrapped until literally right before the ipo. Right. And so there's lots and lots of examples from 40, 50 years ago. I think there's lots of examples where people should never raise money and it blows up the company to raise money. An example would be during social gaming. In the early 2010s, there was a bunch of companies that generated 10, 20, $30 million of revenue a year and they had like four people. A friend of mine was running one of them and I said, don't raise money, it's a terrible idea. Just dividend out the cash. What a crazy idea. He ended up raising a ton of money. They hired like 70 people, they burned through it all, they bought three other things and they blew up and it went to zero. And as founders, they would have done dramatically better from a financial, from a control, from like every perspective if they just hadn't raised money. Now there are counterexamples of that where it makes tons of sense to raise money because you need the capital to accelerate growth and you want to take the market or you need to build something, you need a bunch of gpu, whatever the reason. And so there's very legitimate reasons to raise money and there are some very good relationships with investors too, but the default is too many. Or say you have an app on the App Store and there's examples of this, of certain apps that are pretty simple, that have raised 100, $200 million you're like, why did you do that? I'm not going to name this specific category, but you can imagine categories where it isn't that complicated and they're doing great. But, like, why raise all this money? I feel like I'm one of the few people that people call the fundraiser, and I try to talk them out of it. Sometimes I'm like, what are you thinking? Why would you raise money right now? It's a terrible idea.
