Amid 2021’s record-breaking funding activity, it wasn’t uncommon to see startups raise rounds composed of numerous small checks from a large number of firms and angel investors. But now that said companies are looking to raise extension financing, they’re realizing that more investors doesn’t always mean more future money.
Last year, FOMO was running high, and investors were doing seemingly everything to get into rounds: taking a secondary stake instead of a primary, forgoing a board seat, writing a tiny check just to get into a hot deal.
Many founders leaned into this, and how can you blame them? Investors wanted to put more money into their companies, and each investor brings their own value-add and network to the table. In theory, that looks like a good thing. But, the pros of raising party rounds dry up quickly when the market turns — and a lot of companies are starting to realize that.