Why do successful startup founders raise VC money for new ventures when they have sufficient capital of their own available?

I think in general, the usual reason is the 10–20% Rule (which I just made up).

Founders deep down are usually actually conservative. They look like risk-takers, but really they are white-space see-ers. They just see something others don’t, and therefore see lower risk in an opportunity others would think is crazy.

So when it comes to making investments, they often are surprisingly conservative.

When it comes to new ventures, they want to make sure they don’t lose it all. So they often are willing to invest up to 10% of what they’ve made now, and another 10% in “reserves” if the venture needs more.

If the new venture will likely need more than 10%+10% in the first 36 months, the founders often raise some outside capital.

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Published on July 21, 2018

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