80% at 10 million or 40% at 15?

Picture this: You raised a million in seed. It has been two years. You have traction but not that level that you anticipated. You have to raise Series A. There are some nods, nothing in paper. You will run out of cash in 3–4 months. The team will rebel. Some of them have kids. It’s been a stretch. If you do series A at terms below your expectations, you’ll lose control. It is going to be tough but you have the spirit.

And then you get a call.

“Cherian, think about this.

You guys own 80% now. If you can sell at ten today, you keep the eight. If you raise another five million at 15 valuation, retain 40%, you’ll need to sell at twenty to get at least eight. Add the next three years of struggle, risks, finding buyers at 25–30 million check sizes. Do you think you think you can do it? You know the dudes at LivingSocial? They went through this. Look where they are. There’s a thin line between pragmatism and crazy. Forget the investors. ”

Decisions like this were the most difficult. You hardly sleep. You are inundated with your integrity. “Where’s the vision? What about your promises? Am I crazy or am I a realist? What will history call me? Do I have the spirit and conviction in what we’re doing based on the traction we have?”

God, the predicament!

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