Over-optimizing for the long-term plan over the immediate will land an entrepreneur in trouble, but fundraising is one area where it pays dividends to have a long-term mindset.
Remarking on the dangers of over-planning while running a startup, successful entrepreneur turned successful VC Josh Kopelman notes simply, "Every business plan is wrong.".
Since circumstances change frequently, small business owners have to be at the ready to respond to these changes without stubborn allegiance to a prior point of view formed in a different environment. Thus, good startup founders are trained to operate in the heat of the moment, and to optimize around the present as heat-seeking missiles.
Fundraising is one startup activity where actively seeking heat in the short term could lead to self-destruction.
If you're raising the first capital for your startup now and have interested investors at the table, congratulations! It's not easy to convince investors to take a bet on an intrepid team tackling a new opportunity.
However, you would be wise to heed this advice:
1. The seed round is just the 1st of several high jumps. Negotiating with your first investors, you get to influence where the first bar gets set yourself. Set it wisely.
2. Don't take the high jump analogy too far. "The higher the better" on seed valuation/cap is not long-term optimized thinking.
3. Not only might you alienate certain investors (okay, not terrible if you have your pick of investors-lucky you), but you may fail to clear the bar you set for yourself (terrible)
4. Raising at a flat or down round sucks all around--it sucks for you, the team, your investors, your fundraising, & ultimately your users. Standard investment terms like anti-dilution can bite you hard down the road if activated. Even simply the impact of a lack of upward momentum at a subsequent round can be demotivating to you and the team.
5. Like mega successful startup investors, mega successful startup founders are long term greedy. Yes, successful startup investors also have a long term view of startups and are also long term greedy.
6. Take Evan Spiegel of Snapchat. He actually had to temper his own investors at one point and call for a more sustainable valuation. I dislike citing insights learned from the Sony email hack, but these insights cast Evan in a very mature and favorable light.
If you can set your own seed valuation/cap due to investor demand, congrats, but remember to be long term, not short term greedy.
Going back to the heat-seeking missile analogy, this approach is simply a more sophisticated honing mechanism. If there is a war-winning target 100 miles down the path, you don't want to blow it on the small, insignificant target right in front of you.