Ten years from now, what seismic change will we reflect back on and think, “well that was pretty obvious, in retrospect”? Debt is going to finally come to the tech industry.
There is nothing inherent to tech companies that requires that so many of them fail to live up to their aspirational valuations, aside from the way they’re funded.
Plenty of people these days preach “startups need to rely less on fundraising”; it’s harder to find anyone who’ll challenge the equity mechanics themselves. But continuously selling equity, even at high valuations, is more expensive than the narrative suggests. As a founder, the most valuable optionality you have is the equity you haven’t sold, and the dilution you haven’t taken. But the second most valuable optionality you can have is a valuation that’s not too high.
*:Financial Capital (FK) and Production Capital (PK) in the image.