Is An Inside Round Good or Bad?

Bijan Sabet has today’s Great VC Post titled The Inside RoundIn it, he talks about the pros and cons of an inside round which he defines as:

“There are times where a follow on financing does not include a new VC firm. The new round is financed by the current investors. This is known as an “inside round”.”

He also summarizes the historical conventional wisdom:

“It used to be the case that an inside round often meant something was wrong. It meant the company was unable to raise money with a new outside lead investor due poor operating performance, team, market, whatever.

And sometimes that is a correct read on the situation.

But I believe that is no longer universally true.”

I strongly agree with Bijan.  At Foundry Group, we are very comfortable with doing inside rounds and describe ourselves as being syndication agnostic.  It’s definitely worth wandering over to Bijan’s blog and reading more on this thoughts about The Inside Round.

  • Brad- I love the way you share the love.

    Bijans post was a good one.

  • I agree. Hopefully this will start to erode the VC syndication dependancy problem a bit. Most are paralyzed by the thought of going in alone, or inside. If you made it to VC stardom, then by definition, you should have uncanny skills capable of picking winners. if you think the company will return more than you invested, in a reasonable amount of time, then invest. simple. If you can find others to come in the deal with you who can help, great!

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  • Absolutely agree, sometimes the efficiency of an inside round appropriately wins the day. There are times for an outside round, certainly, but they have a cost in time and progress that is sometimes unacceptable.

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