I was once on the board of a company that was cash-flow positive early in its life. The entrepreneur decided to raise more money, even though he didn’t need to. I was perplexed and asked him why he was raising the amount of money he had decided to raise. His answer was that when he had no cash in the bank, he was willing to run $1,000 experiments. When the company was cash-flow positive, he was comfortable running $10,000 experiments. He now wanted to feel comfortable running $100,000 experiments, and this financing enabled him to do this. If he ran a $100,000 experiment and it failed, it wouldn’t tank the business.
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