No, raising money doesn't put a floor under your acquisition price. It puts a floor under the acquisition price at which the founders make money.
So while a company can certainly paint itself into a corner by raising too much, that phenomenon is not what's responsible for the statistic quoted in this article. If you paint yourself into a corner by raising too much, it doesn't decrease the probability that your company will be acquired, just how much money you'll make personally if it is.
If anything, raising too much money increases the probability a company will be acquired, because (by definition of "too much") it increases the probability the company will fail, and a fire-sale acquisition is the default outcome for companies that have raised a lot of VC funding.
Comments
No, raising money doesn't put a floor under your acquisition price. It puts a floor under the acquisition price at which the founders make money.
So while a company can certainly paint itself into a corner by raising too much, that phenomenon is not what's responsible for the statistic quoted in this article. If you paint yourself into a corner by raising too much, it doesn't decrease the probability that your company will be acquired, just how much money you'll make personally if it is.
If anything, raising too much money increases the probability a company will be acquired, because (by definition of "too much") it increases the probability the company will fail, and a fire-sale acquisition is the default outcome for companies that have raised a lot of VC funding.
Fair enough, fire-sales happen all the time.
Perhaps I should have written 'puts a floor under your acquisition price until your company fails.'