Pulling the alarm doesn’t cause a fire
PG wrote that “If you haven’t raised money yet, lower your expectations for fundraising.”
He attributes this positions to a conversation he had with a promenant investor who “seemed sure the bad performance of the Facebook IPO will hurt the funding market for earlier stage startups.”
This position doesn’t make sense. I can only imagine what early stage Facebook investors feel, but something tells me they feel like they just won a massive jackpot and now suffer the burden of absolute elation. Given the opportunity to invest in the next Facebook, these early investors, and any other investor, would take the risk again, a thousands times over.
Every time Facebook raised money, someone sat on the sidelines arguing the valuation was too high. They were wrong, every time.
There is no problem for real businesses who want to raise money. If you have a second-tier social networking website trying to raise a later-stage round at an unreasonable valuation, you might be in for an unpleasant surprise.
As for the rest of us, running a different kind of business than Facebook, the economic climate does matter – but not because of Facebook. It matters because it impacts other aspects of our business outside of raising money. Most of those aspects are out of our control (capital calls, macro-economic climate, housing markets, consumer shopping sentiment, war, etc.).
But there are important things to focus on that materially impact your business that firmly remain in your control. Customers matter. Hiring matters. Product matters. Those things matter. And if you do those things right, fundraising won’t be a problem.
Fred covered his views on this quite well, too.