Saying yes to venture capital too soon can backfire later

Here's a question worth sitting with before you take anyone's money: is it possible to raise funding too early, even if someone is genuinely willing to write the check right now? Alejandro Cremades's answer is yes, and the reason has less to do with the money itself than with what accepting it signals to everyone watching afterward.

His caution is specific: don't raise venture capital at a stage where you're still trying to figure out product and market fit. The mechanism he describes is called signaling. When a venture capital firm invests in your seed round, the market reads that as the firm saying, in effect, we've looked closely and we believe in this. If that same firm later declines to participate in your next round, your bridge or your Series A, the market reads that just as loudly, and usually more harshly: the people who know this company best from the inside chose not to double down. It doesn't matter if the real reason was unrelated to performance, a fund running dry, a shift in strategy. The signal reads as a red flag regardless, and it can genuinely cost a founder the business.

This connects to something Cremades explains about how venture capital works underneath the pitch decks and handshakes. Startups are, in his words, a very risky asset class, and roughly nine out of ten will fail. Venture firms are built around finding the rare startup that returns ten times their investment, because that single winner has to cover the losses from everything else in the portfolio. That means VCs are calibrated to commit seriously only once there's real confidence behind the number, not before. Taking VC money before you have that confidence yourself puts you in the position of asking a firm to promise something you can't yet promise to yourself, and if you or they turn out to be wrong, the fallout isn't private.

Cremades's practical advice follows from this: if you're not sure yet, don't take the money, delay until there's more certainty on the horizon. It's a genuinely counterintuitive instruction in a culture that treats every funding offer as an unambiguous win. Sometimes the smarter, harder move is turning one down, or at least choosing a different kind of capital, friends, family, angels, crowdfunding, while you're still doing the work of finding out what's actually true about your business.

Before accepting any venture capital, ask yourself honestly whether you could confidently promise an investor that a specific amount of money will produce a specific result, and if you can't, treat that as a signal to wait. Think through, in advance, what it would mean for your company if this exact investor chose not to follow on in your next round, and whether you'd be comfortable with the market reading that decision. While you're still finding product-market fit, lean on capital sources less sensitive to signaling, friends, family, angels, or crowdfunding, and save venture conversations for once the model is proven. And before signing anything, check how recently the firm has actually closed new investments, since a VC quiet for six months may be raising its own fund and unable to follow through on yours.