Fairly often entrepreneurs will pitch investing in their seed-stage company and the projections state that this round financing is planned to be their last. Sometimes it’s even presented as an additional feature of the pitch itself: “We’ll never need to raise money again!”
Capital fundraising is to facilitate growth ahead of cash flows generated by the business. If there is truly a huge venture-scale opportunity ahead of a startup, there should be an appropriate cost of capital for future financings to expand which make sense for the company. But that “if” there is very important… perhaps in many cases the desire for the Seed round to be the final round of financing is a tacit signal that it doesn’t have the potential to be “venture scale” after all.
That is not to say that gunning towards cash-flow break-even isn’t a stated short-term goal of some of our portfolio companies… it empowers entrepreneurs to raise money on their own terms. Achieving cash-flow break-even early in a company’s life-cycle can be a means towards optimizing the growth trajectory and ownership for early constituents.