Why We Don't Raise Seed Rounds (And Why You Shouldn't Either)

The VC Trap

Founders celebrate raising money like they just won the lottery. 'Just closed $1M Seed!' they post on LinkedIn with the obligatory team photo in branded hoodies.

They don't realize what they just signed. They signed a contract that says they must grow 10x in 2 years or die trying. They just sold the steering wheel of their car to a passenger who wants to go faster than the engine can handle.

When you take money, you are selling two things: Equity (which is expensive) and Control (which is priceless). You are now an employee of a board of directors who have never met your customers, never debugged your code, and never lost sleep over payroll.

The Misalignment of Time Horizons

Venture Capital flows from Limited Partners (LPs)—pension funds, endowments, endowments—that need a return in 7-10 years. This forces the VC firm to force *you* to exit within that timeframe.

But what if your business needs 15 years to mature? What if you want to build a legacy family business that lasts 50 years?

If you take VC money, those options are off the table. You are on the 'Venture Treadmill': Seed -> Series A -> Series B -> IPO or Bust. There is no off-ramp. You cannot just 'run a profitable business'. A $10M/year business is a failure to a VC who needs a $1B exit to return their fund.

Revenue is the Best Funding

At Orb21, we teach a different path: Customer-Funded Growth.

• **Customers are better bosses.** If a customer yells at you, it's because your product is broken. If an investor yells at you, it's because your growth chart isn't steep enough.
• **Leverage.** If customers are paying you, you don't need to beg investors. You have leverage. You have freedom. You can build the product *you* want, not the product the board wants.
• **Discipline.** Bootstrapping forces you to build things people actually pay for. You can't fake product-market fit with ad spend when you are spending your own money.

Every dollar of revenue is valid proof of value. Every dollar of investment is just a promise of future value. We prefer proof over promises.

The Math of Bootstrapping vs. Dilution

Let's do the math. It’s brutal.

Scenario A (Funded): - You raise $2M at a $10M valuation. You sell 20%. - Series A: Raise $10M at $40M. Dilute another 20%. - Series B: Raise $30M at $100M. Dilute another 15%. - Pool: You give 15% to employees. - Outcome: You own ~15% of the company. - Exit: You sell for $50M. Investors have liquidation preferences (usually 1x or 2x). After paying them back first, you might walk away with $3-4M (pre-tax). You worked for 10 years for a high salary.

Scenario B (Bootstrapped): - You raise $0. - You own 100% of a business making $1M profit/year. - You run it for 10 years. You take out $500k/year in dividends. - Outcome: You made $5M in cash. You still own the asset. You can embrace slow growth.

The difference? In Scenario B, you answered to nobody. You didn't have board meetings. You didn't have panic attacks about growth targets. You built a calm, sustainable life. You built wealth, not just 'paper net worth'.

When to Raise (Because sometimes you should)

We are not anti-VC. We are anti-dependency.

Raise money to pour fuel on a fire that is already burning. Don't raise money to start the fire.

• **Good Raise:** You have $50k MRR, your CAC is stable, and you need $2M to hire sales reps to triple growth.
• **Bad Raise:** You have 0 revenue, an idea, and you need $2M to "build the team".

If you can't get to $5k MRR without funding, you probably can't get to $100M with funding. The constraint in the early days is not capital; it is value prop and distribution. Money cannot solve a broken product. Prove the value first.