Defensive Fundraising Is Anxiety Dressed as Strategy (But Maybe the Anxiety Isn’t Wrong)

I get weekly updates from the handful of portfolio companies raising right now. Lately I don’t know what to make of them.

I’ve given some version of this same advice for years. Don’t raise “defensively.” The buffer never sits in the bank, it finds a home, rationally, incrementally. Why dilute yourself for insurance?

The founders who raised defensively in 2020-22 are often the ones doing down rounds today. Not because the winter came, but because the buffer changed their cost structure permanently, at a valuation they couldn’t grow into.

I still believe most of that. And yet I’m updating my priors.

Not because I’ve converted to the defensive raise camp. More because the market has gotten genuinely hard to read. Things I expected to fundraise easily are struggling. Categories I’d have passed on are going fast. The A/B market feels more unpredictable than I’ve seen it, because what’s “in” keeps shifting, and beliefs are changing faster than the companies themselves are.

In that environment, the old framework breaks down a little. Raise lean assumed you could predict what the next round would reward. I’m less confident I can. And I suspect most investors are too, even if few will say it.

There’s a prisoner’s dilemma. Every investor knows valuations are stretched. But unilateral disarmament isn’t a strategy. So everyone keeps playing.

Maybe 1 or 2 companies of ten in any portfolio can truly deploy extra capital into a moonshot. The rest probably can’t. But nobody knows which is which, and the pace of change means the answer keeps moving.

I’ve always thought defensive fundraising was anxiety dressed as strategy. Right now I’m not so sure the anxiety is wrong.