I’m writing this from Capital Factory in Austin where nearly every conversation eventually turns to capital.
Not customers. Not margins. Not execution.
Capital.
What surprised me most this week wasn’t the enthusiasm. It was the language. I heard senior Department of War officials speaking comfortably from the stage about term sheets and capital formation in ways I haven’t heard before. That shift isn’t accidental. Under Deputy Secretary Stephen Feinberg, former CEO of Cerberus Capital Management, the lexicon is changing quickly.
Washington increasingly understands capital markets. But Washington cannot, and should not, manage a founder’s cap table.
At one of my Meet the Ringmasters sessions a few years ago, sage counselor Dan Miller, who helped lead CamelBak’s expansion into the defense market during the Iraq war, a move that fundamentally changed the company’s trajectory, told the room:
“If you think access to capital is your problem, you may be focused on the wrong thing.”
Sitting here this week, that observation keeps coming back to me. Capital is rarely the constraint founders think it is. The constraint is understanding what that capital costs, in ownership, in control, and sometimes in the direction of the company itself.
Consider this: sell 25% of your company in one round and you still own 75%. Sell another 25% in the next round and you don’t own half. You own about 56%. Sell another 25% and you’re down to roughly 42%. And that’s before governance terms even enter the picture: board seats, protective provisions, liquidation preferences, and time pressure to scale.
Raising capital is easy. Living with it is harder.
At some point, founders realize they didn’t just raise money. They hired bosses.
I’m reminded of something John Mackey once said reflecting on Whole Foods’ early investors. He described venture capitalists as hitchhikers along for the ride — until they decided they wanted to drive the car. He later admitted he couldn’t wait to get them out. Not because capital was bad, but because the incentives were different.
None of this is inherently bad. Outside capital, used at the right time and for the right reasons, can accelerate growth, unlock markets, and position companies to compete globally. The Department of War’s Office of Strategic Capital and similar initiatives reflect a recognition that access to financing, especially for defense-relevant technology, has historically been uneven. That’s a good development.
But the Pentagon can only prioritize so many capabilities at once. And it isn’t their job to manage the tradeoffs founders make in pursuit of capital.
What I see too often, particularly in dual-use and defense startups, is fundraising becoming the scorecard. Founders talk about rounds closed more than problems solved. Growth timelines start reflecting investor expectations more than market realities. Strategy begins to bend toward capital rather than customers.
When companies ask me whether they should raise capital, I usually ask three questions:
- Why now?
- What problem does this solve?
- What are you willing to give up for it?
Most founders spend more time thinking about valuation than those answers.
Some of the strongest companies I work with took a different path. They grew through revenue first. They used capital selectively and deliberately. They treated outside investment as a tool, not a milestone.
The best founders I know don’t chase capital.
Capital eventually chases them.
There’s nothing wrong with raising capital. But founders should understand exactly what they’re selling, and why, before celebrating the transaction. Because the real question isn’t how many rounds you’ve raised. It’s whether, at the end of the journey, it’s still your company.
