The Importance of Milestone-Driven Financings

The article (written by Andreessen Horowitz’s Partner – Jeff Jordan @jeff_jordan) linked below is a perfect summary of the current funding landscape and the concern that the Partners at CrossCut have been preaching since early 2012. When things get frothy, individual angels think investing is “fun” and flood more money into the market. Generally, this money is unsophisticated, undisciplined and not willing to do the heavy-lifting that is often required when things don’t go to plan.

As markets start to shift and VC dollars tighten up, there is increased pressure on the seed-funded entrepreneurs and the milestones they must achieve to attract next rounds of financing. There is no greater example of this than the raft of ecommerce and subscription commerce companies that have struggled to raise additional financing since September of 2012. LA has tons of them and the rumored change in trajectories of companies like Beachmint and Shoedazzle have only made the situation worse.

We agree with Jeff – raise larger seed rounds, bring in quality institutional seed investors and don’t have inflated egos and valuations. Good investors will help you define the milestones that are needed to attract new capital and they should be able to make the right introductions when the company is ready.

Techcrunch – The Series A Round Is The New Series B Round