You can sum it all up in one concept: He Skipped a (Venture) Round. Really, a Round-and-a-Half.

If you do all the "traditional" 5 rounds -- Seed, A, B, C, D, mez, IPO ... even if you raise nine-figures ... you'll get diluted to about 4%-6% or so.

See, e.g. Aaron Levie and Box: How does Aaron Levie feel knowing he is down to a 4% stake heading into the Box IPO?

If you IPO for $2b+, that's OK.

But the real key is Skipping a Round, if you can, without giving up growth.

How?

• Working for nothing until you get a bunch of customers and real revenues. I.e., get to $500k ARR barely raising any money. Hard. But this way you don't have to sell 33% of your company to get there.
• Be more capital efficient so you can get from say $1m to $10m without needing more capital.
• Get from $1m to $10m in 5 quarters or less. You'll skip the round in there.

It's hard. But if you can pull any of this off, you'll suffer far less dilution.

Because it's less how much you raise that creates dilution -- it's how many times you raise. Because each time, everyone needs to be able to buy a material amount of your company.

Having said that -- it isn't worth it, especially in the age of Unicorns, if you sacrifice material growth to do it. Because the winners just are worth so much more than the runners up.

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