Overheard in the Bay Area-slash-NYC-slash-Portland-slash-Austin-slash-etcetera:

“How’s John’s start-up doing?”

“Really good — they just raised $4 million bucks”

“Wow! Good for him!”

And the conversation usually ends there.

Even the press will announce an equity fundraise as if it were a big feat of success in and of itself.

It absolutely can be. But they’re not all made equal, and they are not the only capital structure worth celebrating.

We hardly ever applaud founders who seek out debt in lieu of equity (even though, frankly, at these interest rates it could make a lot more sense), or those who self-fund and stay away from raising external equity at all.

We hardly ever ask or discuss the details — what was the pre-money valuation? what was the pref? what controls had to be given up? did John have to promise his first child as collateral? 😛

I’m not trying to take away from the success of entrepreneurs or diminish how difficult it is to get external equity investors on board. All I’m saying is that most of the applause is lacking in both context and comparison. At the end of the day, profits and impact matter most — and there are numerous capital stacks to get there.




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