Multi-Tranche Rounds Are a Red Flag. Here's Why. #AI #entrepreneur #investing #vc #technology #tech

Multi-tranche financing rounds are becoming more and more common. On a live recording of Founded & Funded during Seattle Tech Week, @pitchbook's Nizar Tarhuni walked through what this actually looks like and where he draws the line. His take: commanding a premium because your fundamentals genuinely back it up is one thing. Structuring a round to manufacture that number is another, and investors can usually tell the difference. A few things Nizar flagged that founders should weigh before structuring a round this way: +It can be a way to take care of existing investors or bridge documents before terms get harder on the next round +But it can make future partners think twice, even when the underlying product and growth numbers are genuinely strong +Promising future pricing to one investor isn't fair to the ones already in the round at a lower price +Seeing this at the Series A or B level struck Nizar as a founder playing that game too early, before the fundamentals should even be part of the conversation..