Being Able to Walk Away is Key to Funding Rounds
The #1 Mistake Founders Make in Funding Rounds? Saying Yes Too Soon. Learn why walking away could save your startup—and your vision.
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Summary
- Saying no to the wrong deal protects your vision, equity, and long-term success.
- Walking away signals confidence and aligns you with the right partners.
- Funding isn’t just about money—it’s about finding the perfect fit for growth.
Table of Contents
- The Founder’s Perspective: More Than Just Money
- The VC’s Perspective: Betting on the Right Horse
- Real-World Lessons in Walking Away
- The Power Dynamics: A Balancing Act
- Building the Confidence to Walk Away
- Conclusion: The Strength in Walking Away
You’re ready to convince the world that your idea is the next big thing. But the reality is that not every deal is worth taking, and sometimes, the strongest move you can make in a funding round is to walk away.
On the other side of the table, venture capitalists (VCs) face their own pressures and must also make tough calls about which opportunities to pass on. For both founders and VCs, knowing when to step back is critical.
The Founder’s Perspective: More Than Just Money
As a founder, funding is a lifeline — it keeps the lights on and fuels growth. But taking money from the wrong investors can be more costly in the long run than not taking any money at all.Misaligned expectations, overreach from investors, or giving up too much equity early on can derail even the best ideas.
Take the story of Sara Blakely, the founder of Spanx. Early in her journey, she was approached by potential investors who were ready to write a check — but only if they could take control of her company.
Blakely, recognizing the value of her vision, turned them down. Instead, she bootstrapped her business, maintaining full ownership and control.
Spanx became a billion-dollar brand, and Blakely’s decision to walk away from outside funding in the beginning allowed her to shape the company exactly as she envisioned.
Walking away isn’t just about control; it’s about preserving the culture and purpose of your business. Investors bring more than money — they bring influence, strategies, and expectations.
If their priorities don’t align with yours, it can create friction that stifles creativity and progress. Founders need to assess whether a potential investor understands their mission and can genuinely add value beyond the capital.
The VC’s Perspective: Betting on the Right Horse
For venture capitalists, the stakes are equally high. Every dollar they invest is a calculated risk, and their success hinges on identifying startups that can deliver outsized returns.VCs don’t just evaluate a startup’s product or market potential — they evaluate the founders themselves. They’re looking for people who are not only passionate and driven but also strategic and flexible.
Walking away is part of the game for VCs, too. Consider Bill Gurley, a general partner at Benchmark, one of Silicon Valley’s top venture capital firms.
Gurley has often spoken about the discipline required in venture investing. He famously passed on an opportunity to invest in Airbnb during its early days.
While he later acknowledged missing out on a massive success, he stood by his decision, emphasizing that venture investing requires sticking to your principles and portfolio strategy.
For VCs, walking away isn’t necessarily about a lack of belief in the startup — it’s about maintaining focus and ensuring the timing, team, and market dynamics align with their thesis.
The ability to say no, even when tempted, protects them from overextending their resources or taking on investments that don’t fit.
Real-World Lessons in Walking Away
The startup world is full of stories where walking away led to better outcomes. One of the most notable examples is Brian Chesky, the CEO of Airbnb.In the company’s early days, Chesky and his co-founders faced skepticism from investors who didn’t understand their vision. At one point, they were offered $500,000 in exchange for a significant portion of the company.
It was tempting — money was tight, and they were struggling to gain traction — but they declined, knowing it wasn’t the right deal.
That decision allowed them to retain control, iterate on their product, and eventually build a company now valued at billions.
On the other side, there’s the cautionary tale of Webvan, the grocery delivery startup that raised $375 million during the dot-com boom. Despite its initial success, Webvan’s investors pushed for aggressive expansion into new markets before the company had a sustainable model. The result? Bankruptcy.
Both the founders and their investors might have benefited from stepping back, reevaluating their strategy, and recognizing when to pause rather than plough ahead.
The Power Dynamics: A Balancing Act
In funding negotiations, power dynamics often dictate how decisions are made. Founders, especially those raising early rounds, may feel pressure to accept whatever terms are offered.VCs, wielding the capital, hold significant influence. But it’s essential to remember that funding is a partnership. Both sides have skin in the game, and both need to believe in the potential for success.
Walking away requires confidence and clarity. For founders, it means having a deep understanding of your business and the market, so you can negotiate from a position of strength.
For VCs, it’s about trusting your instincts and recognizing when an opportunity doesn’t align with your goals.
Building the Confidence to Walk Away
So how do you build the confidence to walk away? For founders, it starts with preparation. Know your numbers, understand your market, and be clear about your non-negotiables.Having a clear roadmap for your business gives you the leverage to push back when terms don’t align with your vision.
For VCs, it’s about sticking to your investment thesis and focusing on the long game. Not every deal will be a home run, and sometimes the best opportunities come from saying no to the wrong ones.
Take the case of Basecamp (formerly 37signals). The company’s founders famously rejected traditional venture capital, opting instead to grow sustainably and maintain control. By walking away from external funding, they were able to build a profitable, enduring business on their terms.
Conclusion: The Strength in Walking Away
Walking away isn’t a sign of weakness — it’s a sign of strength. It’s about knowing what you want, understanding what’s at stake, and having the courage to prioritize long-term success over short-term gains.Whether you’re a startup founder or a VC, the ability to say no can open the door to better opportunities down the line.
In the end, funding rounds aren’t just about money — they’re about finding the right fit.
When both sides approach the table with clarity, confidence, and a willingness to walk away, they set the stage for partnerships built on mutual respect and shared vision. And that’s the foundation of any great success story.