Why startups should raise money after finding product-market fit

Edited excerpt from What I’ve Learned About Venture Funding by Mark Suster:

I know in my bones that there is a magic moment where capital plays a hugely differentiating role. As in back-up-the-truck, load on $20-30 million and let me blast the market with all I’ve got.

I’ve seen it.

I’ve seen companies who raise the mega round after they’ve truly started to scale and put scale on steroids. I’ve seen the companies that had they not raised the big round would have evaporated. I’ve seen companies who avoided the big round and then struggled without enough resources to ship products on time and then missed market opportunities and sold in mediocre outcomes as others sailed by them.

How can it be that over-funding is bad, bad, bad and then the best possible outcome? And what is the inflection point? It’s subjective. I know many inexperienced market prognosticators claim “VC is dead,” “capital is a commodity,” “crowd-source to the finish line” or “stay lean for life”. But I’ve seen directly just how much capital can separate the winners from the losers when raised at the right time.

(1) Cf. The real difference between funding rounds.
(2) Cf. Raising capital as an offensive strategy.

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