Do rich entrepreneurs with $40 MM in their bank accounts raise $12 MM from investors for their company or do they just use their own money?

Q: Do rich entrepreneurs with $40 MM in their bank accounts raise $12 MM from investors for their company or do they just use their own money? How many millions of their own money would they use?

I think in general, most founders are fairly risk-averse.  They are just confident they see something big that no one else sees.  Those 2 things aren’t in conflict but the intersection of the two can be confusing to non-founders.

So net net, most founders, not all, but most, don’t really want to put more than 10-30% of their ‘savings’ into their start-up.  If for no other reason than to keep dry powder for The Rest of Stuff.

And raising $12m usually isn’t it … there are often follow-on checks and more rounds.

So that $12m investment could really be signing up for $24m over time.  Look at Elon Musk — he ended up having to put every single nickel he had into Tesla to save it.

$24m of $40m is a lot.

Better to get a co-investor, a syndicate partner, to help carry it a bit.

But if you only need $1m – $2m to get going — then you’d just fund it yourself.

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Published on September 29, 2015

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