Spencer Rascoff shares non-obvious considerations when raising venture capital

So we sold the company for $700 million, which seems really great until you remember that there was a down round which basically wiped everybody out. So this is those of you that are going to raise money in the next six months. Pay attention to the ratchets, the liquidation preferences, all the, all the stuff that you don't really understand that the VCs do.

It'll get you.

If things go sideways, like, if things go great, none of that matters. I mean, you know this, right? Things are great, none of it matters. But if things don't go great, it can matter a lot.

Looking back, what were the things? So there were those lessons. But, you know, a lot of folks, as you saw here, a lot of people raise their hand when I ask them, you know, are they going to be raising money? Obviously, having a business doing really well helps, but is there any other advice or feedback you have, folks about how to be successful in raising money and maybe what else to look out for?

Sure. I mean, you're selling a part of your company, you're choosing a partner. Not all money is created equal. Trading off valuation for an investor that you think you can learn from, that will be there for you when the going gets tough. That's definitely a worthy trade off. In fact, even maximizing valuation can be dangerous. Not just because you might choose an investor that maybe don't connect with as much and somebody you do might offer lower. But it ratchets up the, no pun intended, it ratchets up the expectations, which can be pretty dangerous. So like as a founder, you have to understand that if you raise, you know, 10 at 60, you've just taken off the table. Really? Every M and a exit under $100 million. Yeah, you know, and an M and a exit for a hundred million dollars. If you're a founder and you own 10%, might be a fantastic outcome. But if you're raising 10 at 60, your VCs are not going to think that's so fantastic.