Does raising at an aggressive valuation help or hurt a company?

Eric Paley · Sep 20, 2023

Overvalued unicorns with little revenue face only three outcomes: cut burn and build a real company that may never raise again, get a kick-save acquisition at a catastrophically low price relative to valuation, or go under

It takes them too long to realize the money they raised is a liability rather than an asset, and they keep faking it while no one will fund them again

45:28 20VC Roundtable: Is the VC Model Broken? The Biggest Disconnect Ever Between TVPI & DPI, Why Market Size is Dangerous, Why "Go Fast" is Terrible Advice, The Dangers of Raising Large Rounds at High Prices & Why Next Year Will See the Biggest Hiring Spree i

Jamin Ball · Jan 10, 2024

Companies that raised at 100x ARR at scale essentially cannot grow into their valuation: with 20-30% dilution and multiple compression to 10x they must grow revenue twelve to thirteen times just to get back to the entry price, and forty to fifty times for a late-stage investor to make three to five x

Dilution plus multiple compression compounds, and growth rates have been slowing which compresses multiples further

Scope: applies to companies at $10M+ ARR valued in the billions, not seed-stage 100x rounds

17:07 20VC: Did Figma Kill M&A Markets in 2024, The Three Biggest Mistakes Made in Growth Investing, The Three Requirements Companies Need to Go Public in 2024 with Ed Sim and Jamin Ball

Jesse Zhang · Sep 19, 2025

Raising at a very high valuation limits future optionality and can make a still-healthy, steadily growing business look like a zombie company when markets change.

If the market shifts, you can't raise at a healthy multiple on that price, so the business appears to have lost momentum even if it is growing well internally.

Scope: based on founders he knows who have done this

36:26 20VC: Why 90% of Founders Build Startups Wrong | Why AI Growth Rates are Sustainable & Remote Work is BS and the AI Talent War | Competing with Brett Taylor and Sierra: Who Wins the Customer Service War with Jesse Zhang, Decagon

Alex Bouaziz · Oct 22, 2025

Founders should not always raise at the highest possible price; the highest valuation does not always produce the best outcome for the business and its people

M&A is a very viable exit option and the higher your valuation, the harder an acquisition is to get done, so valuation should be optimized against the company's likely future rather than maximized

Scope: depends on what the founder wants in life and how big the business will actually be; Alex himself went for the home run and is glad he did, but says it could have backfired and was naive

24:02 20VC: Deel CEO Alex Bouaziz on Raising $300M+ at a $17BN Valuation | Deel vs Rippling: WTF is Going On | Management Lessons from Ben Horowitz and Nik Storonsky | Deel's M&A Playbook: Lessons from 13 Acquisitions: What Works & What Doesn't

Alex Rampell · Jan 12, 2026

Raising at too high a price is dangerous for the founder: it kills both the next fundraise and M&A conversations

The first question in every financing and every M&A conversation is what the last round price was, and investors and acquirers should be competing to pay three times it — a wildly high mark ends the conversation, and a founder cannot credibly ask for a discount on their own company

42:17 20VC: a16z's $15BN Fundraise with Alex Rampell | The Best Companies Have Hostages Not Customers | The Best Founders Materialise Capital, Customers and Labour | Mid-Sized Funds with Die and The Future of Venture Capital

Jamin Ball · Jan 10, 2024

In the 2021 ZIRP period, investors dropped the milestone requirements that previously gated rounds, so companies raised Series B and C rounds without hitting typical Series A milestones and at very high valuations

Investors dropped the usual milestone requirements while paying very high valuations, so an up round now requires hitting seven to ten milestones and roughly 10x growth — and then the macro turned risk-off and growth slowed

Scope: underperforming relative to plans set in 2021

6:49 20VC: Did Figma Kill M&A Markets in 2024, The Three Biggest Mistakes Made in Growth Investing, The Three Requirements Companies Need to Go Public in 2024 with Ed Sim and Jamin Ball

Harry Stebbings · Jan 31, 2024

Many founders today expand into verticals and use cases that are misaligned and not beneficial purely because they need to grow into 2021 valuations

Meeting 2021 valuation marks leaves expansion as the only available path

56:00 20VC: The Metrics That Matter in SaaS Today; Why CaC Payback is Flawed & CAC Ratio is Better, Why You Need to Hire Three Sales Reps at a Time, How to Forecast in 2024 & Biggest Mistakes Made Forecasting & How to Make Customer Success Sell More with Dave K

Harry Stebbings · May 15, 2024

The biggest challenge created by taking the highest price is that companies then struggle to scale into enormous valuations

38:16 20VC: Fundraising Wisdom that is Total BS; Dilution, Meeting Associates, Taking the Highest Price, Always Be Raising | Why Second Time Founders Are More Investable & Why Not To Hire People Out of College with Dan Siroker, CEO @ Limitless

Akshay Kothari · Sep 18, 2024 · hedged

High entry valuations are a real recruiting challenge when you can't show a candidate a credible path to growth from there, and the companies that have shown such a path are rarer than the number of unicorns minted in that era

Scope: was a bigger challenge in 2022

31:09 20VC: Notion's Founder on "Founder Mode": When it Works & When it Doesn't | Why The Way Startups Fundraise & Construct Boards is Broken | Raising at a $10BN Valuation in Peak Bubble Times and How Notion Has More Money Than Ever Before with Akshay Kothari

Severin Hacker · May 19, 2025

Founders should avoid raising a lot of capital at a super high valuation, because it locks in investor expectations the company may not be able to grow into and raises the risk of a down round.

Investors pay a high price precisely because they expect you to grow into that valuation; you're obviously not worth it at the time, so the expectations become extreme and potentially unlivable.

Scope: Duolingo's own philosophy: no down rounds, no layoffs

64:25 20VC: Duolingo Co-Founder on Why $3M is Harder than $100M to Raise | Why You Should Always Take Tier 1 VCs Even at Worse Terms | Why Europe Can't Win Unless the US Screws Up | How AI Impacts the Future of Work and Education with Severin Hacker

Jason Lemkin · Sep 20, 2023

Skepticism about inflated valuations is confined to seasoned operators; up-and-coming first-time executives still all want to join the hottest, highest-valued startup

In 10-15 recent interviews with first-time head of sales candidates coming out of decacorns and unicorns with good outcomes, every one wanted to join the hot high-valuation company

Scope: based on his own recent interview sample; 'kid' means inexperienced, not young

43:03 20VC Roundtable: Is the VC Model Broken? The Biggest Disconnect Ever Between TVPI & DPI, Why Market Size is Dangerous, Why "Go Fast" is Terrible Advice, The Dangers of Raising Large Rounds at High Prices & Why Next Year Will See the Biggest Hiring Spree i

Jason Lemkin · Sep 20, 2023

Valuation and round-size signals genuinely do matter for people new to the industry, and mocking them is unfair

A first-time head of sales only gets one job at a time and can't make 20 or 30 bets, so they have to rely on signals

Scope: applies to people new to the industry, not sophisticated operators

44:03 20VC Roundtable: Is the VC Model Broken? The Biggest Disconnect Ever Between TVPI & DPI, Why Market Size is Dangerous, Why "Go Fast" is Terrible Advice, The Dangers of Raising Large Rounds at High Prices & Why Next Year Will See the Biggest Hiring Spree i

Akshay Kothari · Sep 18, 2024

The main value of the 2020 round was a stamp of approval that made recruiting easier, and there is no better stamp than Sequoia's

Candidates need to feel the company is a safe bet

Scope: about Notion's COVID-era round

31:34 20VC: Notion's Founder on "Founder Mode": When it Works & When it Doesn't | Why The Way Startups Fundraise & Construct Boards is Broken | Raising at a $10BN Valuation in Peak Bubble Times and How Notion Has More Money Than Ever Before with Akshay Kothari

Arvind Jain · Jul 11, 2026

Raising at an aggressive valuation is worth it primarily as a signal to prospective employees that you are building something special

The high price validates the company in the market's eyes, which helps in recruiting

Scope: reasoning applied to Glean's own Series C

38:26 20VC: Why OpenAI and Anthropic Won't Win the App Layer | Why Teams Will Get Bigger Not Smaller in a World of AI | Why AI Removes Incumbents Advantage of Bundling | China vs America: Who Wins the AI War with Arvind Jain, Co-Founder @ Glean

Harry Stebbings · Sep 16, 2024

The costs of not being cute on price are showing up now, with many companies unable to grow into the valuations they raised at

Scope: agrees with the underlying principle

13:26 20VC: Index's Shardul Shah on Why Market Size is a Trap | Biggest Lessons on Pricing from Leading Rounds in Wiz & Datadog | Why Benchmarks & Averages in VC are BS | How Index Makes Decisions and Why Growth & Early are the Same Investing Style

Harry Stebbings · Oct 21, 2024

Raising at too high a price can damage a company badly because a high watermark you can't scale into forces bridges and makes the next round much harder

You have to fill a hugely high watermark at the next round

38:43 20VC: Kleiner Perkins' Mamoon Hamid on Investing Lessons from Leading Rounds in Figma, Slack and Rippling | Lessons Building a Generational Defining Firm with Kleiner Perkins | AI: Where Value Accrues, Startups vs Incumbents & Scaling Laws

Martin Mignot · Aug 11, 2025

There is such a thing as too high a price: companies that raise huge amounts at very high valuations before real product-market fit end up in a dangerous position

Their apparent PMF was subsidized by investment; once they stop spending on unprofitable customer acquisition they must spend a year or two cutting team and going back to basics, and finding PMF after that much growth, capital and valuation is extremely hard

Scope: price, amount raised and business maturity interact; takes even longer in Europe

32:18 20VC: Figma, Scale, Wiz: Inside Index's Decacorn Factory | Decision-Making, Investment Process, Biggest Lessons, Biggest Misses | Why Gross Margin is a Fallacy at Seed | Never Turn Down a Deal on Price with Martin Mignot, Partner @ Index Ventures

Harry Stebbings · Nov 20, 2024

Founders should raise at a valuation they are confident they can raise at three times the price in the next round.

He offers it as a good heuristic for setting an early-stage price.

Scope: offered as a heuristic

26:18 20VC: Turning $16.5M into $2.1BN; Lessons from the Greatest Venture Investment in European History: UiPath | Why VC is Not Being Commoditised | Why Price Does Not Matter | Lessons on Loss Ratio, Selling and Signalling with Cem Sertoglu

Anish Acharya · Feb 9, 2026

At the early stage (sub ~$100M), price matters mainly because it can impair the ability to raise the next round, not for its own sake; price only starts to really matter in the hundreds of millions

At $50-120M the difference in check economics is a wash for the fund, so what matters is which expectations the founder signs up for; the $500M round is hard, and raising at 300 vs 500 vs 700 is significant

Scope: applies to early-stage rounds; price does really matter at growth stage

43:36 20VC: Is SaaS Dead in a World of AI | Do Margins Matter Anymore | Is Triple, Triple, Double, Double Dead Today? | Who Wins the Dev Market: Cursor or Claude Code | Why We Are Not in an AI Bubble with Anish Acharya @ a16z

Eric Paley · Sep 20, 2023 · hedged

The idea that big rounds at high prices attract the best talent has been true but is becoming less true, as talent starts to see an oversized capital stack relative to revenue as a warning sign

Candidates notice when a company brags about a $300M post and $60M raised on $5M of revenue, and so many unicorns are about to lose that status

Scope: says the shift is only starting and is small

42:21 20VC Roundtable: Is the VC Model Broken? The Biggest Disconnect Ever Between TVPI & DPI, Why Market Size is Dangerous, Why "Go Fast" is Terrible Advice, The Dangers of Raising Large Rounds at High Prices & Why Next Year Will See the Biggest Hiring Spree i

Ed Sim · Oct 27, 2023

The best talent now scrutinises valuation and dilution and will choose a company at the best price with the right amount of capital for the risk, rather than the highest-priced company.

Employees have watched themselves sit in unicorns for years, take pay cuts and make no money, so they have gotten much smarter about what a high headline valuation means for their outcome.

7:49 20VC: The Three Types of Seed Round Today, Why Seed Has Never Been More Competitive, Why Pricing Has Never Been Higher, Why Boards at Pre-Seed Can Be Helpful & How Too Much Cash Too Soon Can Harm Companies with Ed Sim, Founder @ Boldstart

Immad Akhund · May 12, 2025

Founders should take the highest valuation offered rather than deliberately pricing down, even at irrational multiples

It is very hard as an entrepreneur not to chase the highest valuation; he raised Mercury's Series B at 120x revenue, which wasn't rational, and would do it again

Scope: self-labelled contrarian take

12:39 20VC Exclusive: Mercury Founder Launches First $26M Fund | Why Founders Should Take the Highest Price | Why Serial Entrepreneurs are Better | Why AI Is So Overhyped | The Future of Venture Capital with Immad Akhund

Amit Bendov · Sep 12, 2025

Returning to Gong's prior $7.2B valuation is not a worry, because if the company can eventually be worth $100B the timing of the mark is irrelevant.

The only difference is how much time it takes; at a high enough altitude the question is whether the company has $100B potential, and Gong isn't pricing itself right now.

Scope: could take one, two, five or ten years

56:15 20VC: Why AI SDRs are BS and Do Not Work | How to Use AI in Your Sales Team and Process to Win Today | What Skills Do All New Reps Need to Have in an AI First World with Amit Bendov, CEO @ Gong

Harry Stebbings · Oct 28, 2024 · hedged

There is a generation of companies currently growing into the valuations they raised at

41:29 Current generation of companies is growing into past valuations

Daniel Khachab · Oct 28, 2024

The real cost of a billion-dollar valuation is cultural: people conclude they have made it, get less hungry, and the company starts attracting applicants looking for a safe place to work

Crossing the unicorn mark signals safety, when in reality the company is still high-risk and needs people who thrive in chaos and change

42:12 Billion dollar valuation signals safety eroding hunger and attracting safety seekers

Sebastian Siemiatkowski · Feb 16, 2026 · hedged

In high-growth phases, founders should watch whether multiple expansion is outpacing revenue growth — revenue outgrowing multiples is fine, multiples outgrowing revenue signals longer-term trouble

40:28 Multiple outgrowing revenue is the warning sign

Guy Podjarny · May 24, 2023

Employees at companies stuck under inflated valuations should receive equity top-ups, and investors should be willing to accept that dilution

People should be financially incentivized in a competitive manner around the growth they're being asked to deliver, even if it is harder for the investor who paid the high price to accept

47:51 Equity top ups funded by investor dilution fix employee morale under stuck valuations

David Tisch · Feb 27, 2023

Raising at a high valuation is not a net negative for a founder as long as they build a good company; down rounds and sideways rounds are survivable bumps.

Many long-lasting great companies of prior vintages had down and sideways rounds; the real problem is failing to build product, business model or revenue growth the market rates.

20:27 High valuation is not a net negative if the founder builds a real business since down and sideways rounds are survivable

Eléonore Crespo · May 9, 2025

Founders should avoid pushing valuation too high; the difference between a $20M and $50M seed is fairly harmless, but once in billion-dollar territory an inflated price can really hurt you.

At later scale, and especially if the company goes public, the price you raised at starts to matter.

37:35 High valuation is harmless at seed but risky once past billion dollar scale

Harry Stebbings · Sep 18, 2024

Valuation matters a lot for companies that are not cash flow positive, and much less for those that are

If you're not cash flow positive, judgment day on your valuation comes in eighteen months when you have to go back to the VCs

30:31 Valuation relevance is conditional on cash flow status not stage

Akshay Kothari · Sep 18, 2024 · hedged

Valuation still matters even for a cash-flow-positive company because of its internal effect on employees

Employees need the stock they received to be worth that much and to keep growing in value over the years

30:48 Valuation matters internally for employee equity value regardless of cash flow status

Mark Goldberg · Oct 25, 2024

Founders who take a graduated approach to fundraising rather than overstretching on valuation end up advantaged

When employees know the valuation isn't realistic, the company loses cultural momentum, which hurts morale and its ability to do its best work

37:25 Graduated realistic valuation preserves employee morale and momentum

Tom Hulme · May 8, 2024

Heat around an early round is damaging because it drives up valuation and changes the founder's beliefs, which is a complete distraction especially for first-time founders

Hot rounds attract a lot of money flying in afterwards, whereas the businesses he has loved got fundamentals right, stayed relatively conservative and compounded over a decade

17:15 Round heat inflates valuation and distorts founder beliefs especially for first timers

Jason Lemkin · Jan 13, 2023

Joining a company valued over $1B in 2023 as an employee means your equity will be worth essentially nothing regardless of exit price.

There are no $100B outcomes; even the best recent companies like HashiCorp and GitLab aren't worth $15–20B, so there's no headroom above a billion-dollar entry price.

21:32 Joining a company valued over 1b in 2023 means employee equity will likely be worthless