I do really like the example you gave for how you can frame it but I’m not too sure how I feel about tranche funding overall. From VC sentiment I’ve heard in the past, my understanding is that tranching was very popular back in the day, but isn’t so common anymore and can be seen as a red flag.

I think it makes sense as to why it can be too risky — aside from the messy cap tables it can sometimes create (especially when founders raise a buncha SAFEs at a buncha different vals). To me, it kinda goes against what a good investor should be doing; which is having conviction on the founders/team. I think it just builds a rocky foundation for a founder/investor relationship right from the get-go with too many variables up in the air that might still make things go awry. And it may just be an easy way to force yourself into thinking about short term milestones and have to still do more work overall.

But idk, how you framed it is still resonating in some ways. I think in my head it can only make sense if it’s for bringing on a pre-seed angel and you already have >90% likelihood leads committing in the near term. The benefit would be to limit dilution and the time spent in the next round talking to that angel discussing terms and getting them to wire.

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It’s worked for the startups I’ve worked with who’ve gone this route.

If you have enough of a reputation in your sector it can be less valuable to do this.

But every talented operator angel you bring in during the fundraise adds additional data points and increases the number of people who can make intros to leads. It’s is not uncommon for one of the angels to end up introducing you to the lead.

In terms of messy cap tables…this really isn’t a thing if someone is running a clean process. There’s usually just one tranche prior to the lead.

Also, the valuation of the company isn’t going up arbitrarily - if the founder is doing things right they’re making substantive business progress during the fundraise (last company I worked with was growing their key metric 25% week over week throughout the entire raise process)

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