It’s right that people can self-fund the startup to completion. But notice that this necessarily reduces the value of the startup, because you are missing some option value (the ability to sell off pieces of it before IPO for additional capital for growth). And the opportunity cost for that money is likely buying into other startups.
If what really matters is having 5% of all the startups, say, rather than 100% of the 5% most promising startups, then having to self-fund them all the way is bad. (Especially so since money goes much further in the earlier rounds, meaning that if you have sharper eyes than other funds, a thing you’re hoping to do is buy the equity when it’s cheap and trust in the followers to buy the equity when it’s expensive.)
It’s right that people can self-fund the startup to completion. But notice that this necessarily reduces the value of the startup, because you are missing some option value (the ability to sell off pieces of it before IPO for additional capital for growth). And the opportunity cost for that money is likely buying into other startups.
If what really matters is having 5% of all the startups, say, rather than 100% of the 5% most promising startups, then having to self-fund them all the way is bad. (Especially so since money goes much further in the earlier rounds, meaning that if you have sharper eyes than other funds, a thing you’re hoping to do is buy the equity when it’s cheap and trust in the followers to buy the equity when it’s expensive.)