What is the reason that founders should raise funding if the business is already highly profitable?
What is the reason that founders should raise funding if the business is already highly profitable? Should founders just reinvest those profit into the business themselves to expand?
I would argue you shouldn't, but there are various reasons why companies do this:
a) PR - you get a lot of publicity for being 'valued' at a high number via a funding round. Many companies chase unicorn status.
b) stockpiling cash - there is a saying that it's better to raise money when you don't need it. There are many stories of big profitable tech companies that take cash and just sit on it for a rainy day
c) more aggressive growth plans / internationalisation - eg. enterprise businesses with proven model that want to grow into 10 new countries - takes cash to setup new offices and hire sales staff etc
Thank you! lots of interesting points I never thought about.