Silicon Valley has a commonly accepted script: Identify Startup Ideas. Sell a portion of your company to increase venture capital. Sell Raise more venture capital, and sell more. Repeat until the company becomes public, or is achieved, hopefully for billions in any way.
But what will happen if you have not reached the fundraising treadmill after the first round? What would happen if you create your company to sprint the SPR of profit through a slow, sustainable growth instead of upside-down growth-as many VC-backed companies do?
The question is that the Founder and CEO of Security Paul A. Poker asked himself after collecting a round in the $ 21 million series in 2021, and a year later, almost the money was lost. The era was led by David Six’s craft ventures, attended by Anderson Horwootz’s Martin Casado and co -founder Frederick Carest, co -founder of Okta.
“I started the company in March 2020,” he said on the Tech Crunch’s Equity Podcast this week. This is my second company that I founded. “
He said his previous company, which was sold by a Wi River, had increased its first capital before the product market was fit. This is very common. Founders often raise before getting a product they know that consumers will pay a good price.
In the past, Rathek called the decision his “mistake”.
So for security, he turned upside down. He waited until the company targeted Million 1 million RAR, which took a year, and then increased its first and only, the series.
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The security pool uses AI to accelerate the diligence due to enterprise security, which is in every major enterprise transaction when signing new IT contracts. The security pool has promised to shrink security reviews from months to days or hours, which helps companies to stop the deal by shutting down the deal. It has big -name users such as an air table, Figma, Langchen and Grammry, among others.
But in 2022, he suffered a crisis. Interest rate increased and the venture capital market crashed. It will be difficult to raise more funds. “We were burning a lot of capital,” he said. “Like, we were 14 months away from the money ended.”
It was a wake -up call. Haramal had to reduce the costs rapidly, which means a large holiday. He said, “It was very painful that he vowed to do different things.” “We have increased our runway, and we tried to extend the company to the cash flow break, even the cash flow positive profit,” he said.
Although the VC amount is flowing again in 2025, especially for the AI startups, “we have not taken the second round,” he said. Reason? He now sees that the VC money comes with his price tag.
“The more we raise the capital, the more we are, the more we expect, the more we will control the company, so much so that we will only feel to get the services of those who will probably not work,” he said.
“For venture capital, what is important is development,” he said. For some investors, the increase in income is more important than improving the overall margin, he said.
This means that a company can be deep in red, until it sells more. The VCS is confident that the founders will later detect profits. Until then, they can keep raising funds. And if they cannot, the company may not survive.
Harmal wanted he described as a “sustainable growth” for security Paul: slow and solid. If the sale was limited to a handful of deployment at any time, his team could ensure that all consumers were well riding in their edge affairs.
He didn’t just want to sell the product to consumers not to use the product and the time to renew. “This story happens all the time because there is a lot of pressure on the growing companies,” he said.
On the other hand, he said he found that a slow RR “healthy overall margin can lead to collecting huge cash.”
It is clear that he is not advocating against venture capital. The other startups may be fast and raised and chased. He is not even denying any other round for the security pool. He just wants more founders to think about slowly, proportional alternatives.
“I picked up the venture capital,” and I didn’t pick it up again because what I am trying to do is to keep it in a position where it does not need to repeatedly venture capital. “
Listen to the full conversation on the Equity Podcast, which includes Haramal’s suggestions on how to find the Capital outside the venture.