The old VC mantra of "go big or go home" is broken. My take: Bigger isn't always better when it comes to funding your business. And I'm putting my money where my mouth is... At OpenSky Ventures, we're the pre-seed investors who are focused on finding the disruptive founders building the next generation of innovative commerce startups. We've funded 15 companies over the last 16 months from $100k to $250k check sizes. We're operators with experience who have both successfully exited. We don't care if you want to exit for $50m or $500m as long as our cost-basis is aligned and we have a 10x upside potential. We know that the startup world is constantly pushing this narrative that massive funding rounds and hyper-growth are the holy grail. But from our experience as pre-seed investors, excessive dilution can seriously impact your long-term ownership and potential rewards. Let's look at the numbers. If you raise $100 million to achieve a $500 million exit, it's likely to come with restrictions and preferences that seriously hinder your exit potential. Your slice of the pie ends up being much smaller than if you had taken a more targeted pre-seed round from a VC and then nailed a $100 million exit without giving up tons of equity. This approach may sound counterintuitive (especially given the 'unicorn or bust' narrative that's been pervasive lately), but in many cases, a smaller, more focused strategy can actually lead to a more rewarding long-term outcome--for both founders and investors. In fact, I ran a similar playbook when scaling StackCommerce. We took a small funding round early on, then scaled from there. I call it "seed-strapping." One of our portcos, Levanata, is running a similar play (check out my post on their growth for a deep dive). I'll leave you with this. One of my goals in getting into venture capital is to empower founders to scale their businesses while holding onto the ownership they deserve. On that note, if you know someone who fits that description in the ecomm infrastructure or CPG space, drop me a line.
Smaller, focused investments often lead to greater control and more meaningful exits
This is why I always say it’s not about the size of the check but the vision behind it. Good stuff here 👍🏻
The market has needed something like this. So many "fallen angel" startups that're great companies but never hit venture scale.
Focusing on sustainable growth makes way more sense than chasing unicorns all day long tbh
Small steps can lead to giant leaps without losing your shirt along the way.
Absolutely love this perspective
I’ve seen too many startups get lost in the funding hype. It’s about building something sustainable.
Yes - this bleeds into another inefficient maxim: be all in without regard for the 90% failure rate. We short change startups and ourselves as investors by not enabling founders to think long-term through diversification support.
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5moJosh Yes I agree, this is one way to success (which i prefer) and have lived this many times w multiple exits at $100 million to over $500 million while being conservative on capital raising and spend and often running profitable. Since you’re taking about “what’s broken” … you know what’s BROKEN is the over use of the phrase “xxxx is broken”. Truth is traditional VC go for billions isn’t broken, it just a different route to attempt a different type of success… bigger “outcomes” potentially but lower odds, but not “broken” 😉