Startups would be another good reference class. VCs are incentivized to scale as fast as possible so they can cash out and reinvest their money, but they rarely give a new organization as much money as Redwood received.
Startups usually receive a seed round of ~$2M cash to cover the first year or two of business, followed by ~$10M for Series A to cover another year or two. Even Stripe, a VC wunderkind that’s raised billions privately while scaling to thousands of employees around the world, began with $2M for their first year, $38M for the next three years (2012-2014), and $70M for the next two years after that.
I’m not sure how long Redwood’s $21M is meant to cover, but if it’s less than a period of 4 years, then they’re spending more than the typical 5M/year for a Series A startup. There’s a good argument to be made that OP can be more risk tolerant than most VCs and take a big swing on scaling Redwood quickly. But beyond cost-effectiveness, another downside of fast funding is that scaling organizations effectively is very difficult, and it could be counterproductive to hire quickly before you have senior management in place with clear lines of tractable work.
Thanks, this is helpful. One thing to flag is that I wouldn’t find the 2012-2014 numbers very convincing; my impression is that VC funding increased a lot until 2022, and 2021 was a year where capital was particularly cheap, for reasons that in hindsight were not entirely dissimilar to why longtermist EA was (relatively) well-funded in the last two years.
Yep that’s a good point. Here’s one source on it, funding amounts definitely increased throughout the 2010s. An alternative explanation could be that valuations have increased more than funding amounts. There’s some data to support this, but you’d need a more careful comparison of startups within the same reference class to be sure.
Startups would be another good reference class. VCs are incentivized to scale as fast as possible so they can cash out and reinvest their money, but they rarely give a new organization as much money as Redwood received.
Startups usually receive a seed round of ~$2M cash to cover the first year or two of business, followed by ~$10M for Series A to cover another year or two. Even Stripe, a VC wunderkind that’s raised billions privately while scaling to thousands of employees around the world, began with $2M for their first year, $38M for the next three years (2012-2014), and $70M for the next two years after that.
I’m not sure how long Redwood’s $21M is meant to cover, but if it’s less than a period of 4 years, then they’re spending more than the typical 5M/year for a Series A startup. There’s a good argument to be made that OP can be more risk tolerant than most VCs and take a big swing on scaling Redwood quickly. But beyond cost-effectiveness, another downside of fast funding is that scaling organizations effectively is very difficult, and it could be counterproductive to hire quickly before you have senior management in place with clear lines of tractable work.
Some numbers here (https://www.investopedia.com/articles/personal-finance/102015/series-b-c-funding-what-it-all-means-and-how-it-works.asp) and here (https://www.fundz.net/what-is-series-a-funding-series-b-funding-and-more). For Stripe funding numbers, google crunchbase Stripe Seed / Series A / Series B.
Thanks, this is helpful. One thing to flag is that I wouldn’t find the 2012-2014 numbers very convincing; my impression is that VC funding increased a lot until 2022, and 2021 was a year where capital was particularly cheap, for reasons that in hindsight were not entirely dissimilar to why longtermist EA was (relatively) well-funded in the last two years.
Yep that’s a good point. Here’s one source on it, funding amounts definitely increased throughout the 2010s. An alternative explanation could be that valuations have increased more than funding amounts. There’s some data to support this, but you’d need a more careful comparison of startups within the same reference class to be sure.
Thanks, appreciate the concrete data!
I appreciate this comment for giving concrete data that improves my model of the world. Thanks.