Some good thoughts on the often not discussed topic of the value of capital from a tier 1 investor!
'Does it matter if I raise from a Tier 1 VC?' I've answered this question in various forms 3 times in the last 2 weeks from founders who have term sheets in hand. Sharing my advice here as I think it could be helpful to other founders. ❓Firstly: does tier 1 vs tier 2 or 3 make any difference to your trajectory? Yes it does - even without any pro-active value-add from the VC. VC brands are extremely valuable. VC is one of the few asset classes where there is a persistence of returns between funds (even when the partnership changes). This suggests the brand of Tier 1 VCs can lead to a virtuous cycle of the best deal flow and therefore the best returns (Link to study in comments). This signal from a tier 1 fund inevitably drives more inbound investor interest. AngelList Talent also contributed to a study which showed startups with top tier investors attracted significantly more job applicants than those without. (link again below in the comments). 📃 Secondly: If you have multiple term sheets should you optimise for quality of VC or terms? This is very founder / startup dependent... but assuming all the term sheets have similar 'control' provisions my response is best summarised by Jason M. Lemkin: 💰 'Tier 1 VC is great. But more money is may be even better.' One of my portfolio companies had a $12m difference in valuation for Series A term sheets last week. The tier 1 had the lowest, and a tier 3 had the highest. But the higher valuation of the tier 3 meant the founders could raise considerably more capital with similar dilution. If you can raise 25% more capital a lower tier VC - I'd take that option every time. Importantly: no investor will make or break your company... the impact they have will be negligible when compared to your team.