Dealing with a down round is not fun. I agree. But by the same token, having a low valuation is certainly a lot less fun. While I do understand the logic, I found it to be a self-serving hype promoted by VCs, which I obviously don't subscribe to. Entrepreneurs need to get the right valuation in order to make it worth their while to make all the necessary sacrifices and effort. As far as the second point made about taking the time to hire the right people and not to bow by pressure, that advice is golden.

As far as owning a small percentage of a big pie, that's another self-serving and hyped argumented promoted by VCs. As an entrepreneur, I want to earn the biggest possible percentage of the biggest possible pie. Compensation must be commensurate with risk. Indeed, the party who is taking the highest risk is the entrepreneur followed by the limited partners and followed by the VCs. The latter are not taking much risk. If the venture is failing, it is the entrepreneur who is asked and expected to cut his/her salary or even take no salary. The VCs don't reduce their salary or their administration fee. In fact, rarely do VCs invest any money of their own. The only thing that VCs loose is the potential profit that they would have made - well, in my world, that's not much of a risk especially when playing with other people's money. On the other hand, the entrepreneur looses his/her money and most likely his/her house, and potentially get divorced - that's a lot of financial, emotional, social, and career risk that entrepreneurs take. From the salary to the percentage of ownership, the investment equation is out of line and should be adjusted in favor of entrepreneurs. One should not conclude from my comment that I am a VC basher - not at all. I do recognize the value that VCs bring to the table, but I also recognize from my experience that entrepreneurs are getting screwed too often. The objective is to make the system more balanced, fair, and worth the sacrifice and effort to entrepreneurs, not so much when the venture succeeds but especially when the venture barely survives. For example, when the venture goes through rough times, the entrepreneurs takes a cut but the VC doesn't give up any equity or any preferred rights. In fact, entrepreneurs are further punished by a down round that hurts them the most. In certain circumstances, the VCs actually benefit from a down round provided that the venture bounces back. On the other hand, entrepreneurs are left with less if they succeed in turning around their venture. How is that fair?!!

Working backwards as suggested make entrepreneurs dependable on VCs. Instead, entrepreneurs must go back to basics not backward. The venture must work towards pleasing the market not the VCs. The main question that entrepreneurs should ask is not "what do I need to do to get funded" but rather "what do I need to do to get customers", in doing so, VCs will chase you instead of you chasing them which is a fruitless excercise most of the time. In other words, entrepreneurs must build viable businesses not fundable business plans. I would argue that working backwards is indeed the source of so many failures. As we all know by now, raising money does not garantee success. So the good advice is to focus on the business and not on VCs.