Congratulations, you made it! You raised some FFF funding, government grants, and prizes from a startup competition and you were able to get your startup to $7–15K MRR. Your team is incredible, your direction is clear, and you can take on the world.

Now it’s just a question of money.

Thanks to startup pop culture, your first thought is to go and raise an equity round from business angel groups or possibly an early stage VC. Then finally get your picture on the local newspaper or even on Techcrunch with a title like “The next X of Y just got funded!”

Finally, you can go around town with your funding medal, your astonishing valuation, and a lot of cash in the bank. What’s not to celebrate?

But have you ever thought about the hidden cost of your funding?

Here are the real costs:

You signed a deal to push your startup to the limit, to kill it if necessary, in the name of the god of growth. You are not in charge anymore, growth is. You gave up an insane amount of money You lost an insane amount of time

Let me explain each point.

Equity round = expiration date

Unfortunately, only a really small group of founders realize the true cost of raising growth capital through an equity round: Selling equity at the seed stage means agreeing to generate growth in an unsustainable way.

You will have to deploy that capital fast over an agreed period of time. The end of that period is your startup’s expiration date. From the moment you sign that term sheet, your startup has a death day.

The reason seed investors force startups to spend their money fast is that your interests and theirs are not aligned. Success for a seed investor means you raising the next round at a crazy valuation. That can be achieved only with astonishing growth.

Meanwhile, your goal as an entrepreneur should be to build a great business, not the next round or the next valuation. You will never find a seed investor that will tell you: “Don’t spend your money too fast, take your time to understand the dynamics of your business or find the perfect person to hire.” Instead, you will hear them say, “Deploy that capital as fast as you can and show me that hockey stick.”

The consequence of this is that you’ll have to deploy that money as fast as you can, wasting a lot of cash because you don’t really know what you’re doing. After 10 months of crazy spending and with only 9 months of cash left in the bank, you’ll have to get back on the fundraising wheel, pitching to the next pusher of growth. If he likes what he sees, you’re safe. You’ll get your next injection of steroids (capital) with an extended expiration date (yep, each round is just a way to postpone it) and go back to pump up your burn rate.

Unfortunately, your growth might not be impressive enough or the market may have shifted so your sector is no longer “hot”. In this case, your VC already knows there won’t be anyone after him, you won’t get your round, and you’ll be left alone in the cockpit of your startup with its unsustainable structure racing towards a wall as fast as it can.

Is this really the dream you had when you raised your seed round?

Startups who can’t raise the next round and are unable to quickly change their structure from unsustainable to sustainable, die. The few that are capable of surviving (they’re able to switch to a sustainable business) are just postponing their expiration date.