Venture capital is relatively new in the history of financing new businesses, but it has an outsized impact. Venture-backed startups have created trillions of dollars in shareholder value and comprise a large proportion of the stock market. About 10 percent of billion-dollar startups were bootstrapped or self-financed.…

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As a founder, the goal then becomes to metaphorically peel each layer of the onion — Each fundraising milestone turning into a set of risks being evaluated and sidelined. The earliest investors become the partners to help figure out what to focus on. Good pre-seed angels and investors are often described as “having taste” for good startups — In tru... See more

Let’s use an example to illustrate how this works. Imagine a $300 million fund that wants to invest in twenty companies. VCs normally use a portion of their investments for their very first investment (called de novo capital), but the rest they keep as reserves (called follow-on capital) to maintain ownership in their companies in subsequent rounds

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In short, when a private company raises less capital at lower valuations, employees have the chance for more upside if the company succeeds.