the most expensive money you'll ever raise

tuesday afternoon i taped an episode with a partner who has run the money side of an early stage venture firm since 2001. the side founders see least.

i asked him about the biggest financing mistakes first time founders make. he didn't hesitate. taking too much money at too low a valuation, early. and giving up control too fast.

then the line that became the episode.

venture capital is probably the most expensive money you're ever going to raise.

coming from someone whose job is deploying venture capital, that's worth sitting with.

think about what each kind of money costs. bank money costs interest. customer money costs work. venture money costs a slice of everything the company will ever be, plus a say in how it gets run. once you start giving up control, he said, you never get it back.

so his first question to a founder is always the same. do you really need it? use up the less dilutive options first. raise venture when it buys something specific nothing else can.

then i gave him a scenario. two offers on the table. one gives you more money at a lower valuation. the other gives you less money and you keep more control. which one?

he leaned toward control. with a catch. dig into the partner. what do they bring besides the check? distribution, help building the team, a network that actually opens doors? what exactly are you giving up for it? and talk to other founders who've worked with that firm. i'd add, call the ones whose companies didn't work out.

the question he says founders almost never ask a vc... what specifically can you bring to my company?

treat it like a job interview, he said. know your gaps first, then see if they fill one. you're putting this person on your board, maybe for a decade.

i love that, because it flips the power. most founders walk into investor meetings as the one being judged. but a board seat is one of the most valuable things you'll ever give away. you should be judging too.

he also told me what makes him trust a founder in a board meeting. it isn't the good news. it's the founder who walks in and says we messed this up, here's why, here's how we fix it. transparency. the red flag is the founder who only brings dreams and wishes and never the real picture.

that one goes way beyond the board. the founder who sends the bad month with a plan gets believed on the good months. the founder who only sends good months gets believed on none of them.

and when i asked for one rule about money, he said it's gas in the tank. be careful who you get it from and how, because there's a cost and a control factor.

here's how i'd put it to you.

most founders ask how much can i raise. the better question is what's the least i can raise to reach the next proof point, from the people who'll help me most. that's a smaller check, from fewer people, picked on purpose. it's also the version where you still own your company when it works.

long term, the founders with the best outcomes aren't the ones who raised the most. they're the ones who raised the right amount from the right people and kept enough of the company that the win was still theirs.

if you're about to raise and want to think through amount, timing and who to let in, that's the work in fundraising strategy.

so before your next investor call... what's your answer when they ask what you need, and what's your question when it's your turn?