Y Combinator Co-Founder to Start-ups: Lower Funding Ahead
Venture capitalist Paul Graham warns his companies to price themselves more conservatively.
In a note written Monday night to Y Combinator start-ups, co-founder Paul Graham warns founders to “lower your expectations” when fund-raising.
He says he suspects it will be harder to raise money “regardless of price,” and points out that companies that have already raised funds at a higher valuation now risk a “down round,” which could make the company look less attractive to investors.
“If you haven’t raised money yet, lower your expectations for fundraising,” he writes.
This warning comes after he and fellow Y Combinator partner Jessica Livingston met with an investor who was pretty certain that the Facebook IPO would hurt funding for younger start-ups, according to the note.
Graham expresses the importance of flexibility when negotiating deals, and tells companies to exercise caution with spending, He writes, “I often tell start-ups after raising money that they should act as if it’s the last they’re ever going to get.” –Erin Kim
Photo via Dave Thomas.