# Founders should not maximize every round's valuation

Markdown copy of https://realalpha.app/s/founders-should-not-maximize-every-rounds-valuation/ on Real Alpha, the best minutes from long interviews with the people building AI. Cite and link the page, not this copy.

- Speaker: [Erik Bernhardsson](https://realalpha.app/builders/erik-bernhardsson/) · Erik Bernhardsson is co-founder and CEO of Modal. · Co-founded Modal, the high-performance cloud for AI teams; previously led Spotify's music recommendation and data infrastructure teams.
- Host: [Harry Stebbings](https://realalpha.app/people/harry-stebbings/) · Founder, 20VC · Built a venture firm on his podcast; its third fund closed at $400M.
- Show: 20VC
- Episode: [Modal CEO: Has Open-Source LLM Inference Peaked? | What Happens to the Cost of Compute](https://realalpha.app/v/1dwyL6Iz_PU/), Nov 2, 2026
- Moment: 7:52 to 10:31 of the episode (3 min), playing on https://realalpha.app/s/founders-should-not-maximize-every-rounds-valuation/; the episode from there: https://realalpha.app/v/1dwyL6Iz_PU/?t=472

## Quote

> “it's often better to **raise a lot less money at a lower valuation**, and then keep the VCs hungry for the next round.”
> — [Erik Bernhardsson](https://realalpha.app/builders/erik-bernhardsson/) at [9:02](https://realalpha.app/v/1dwyL6Iz_PU/?t=542) · 20VC

## Takeaways

1. Erik has never made a pitch deck.
2. He built investor relationships well before his latest raise.
3. When capital isn't scarce, raise less rather than chase a higher price.

## About this segment

Erik Bernhardsson built investor relationships well before raising and has never made a pitch deck. When capital isn't scarce, he says less dilution and keeping investors engaged can beat maximizing valuation.

From “Modal CEO: Has Open-Source LLM Inference Peaked? | What Happens to the Cost of Compute”, Nov 2, 2026. [Watch the full episode](https://realalpha.app/v/1dwyL6Iz_PU/)

## Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

[8:04](https://realalpha.app/v/1dwyL6Iz_PU/?t=484) I kind of hate fundraising, honestly. I mean, it's fine. I don't know. Like, I enjoy it when it's, like, good people. But it's, like, kind of challenging. You have to say no to a lot of people. I guess that's a good problem to have. But, you know, in general, it's... Oh, you have to say no to a lot of people? Oh, Eric, I'm sorry. I know, I know. That's a horrible thing. Oh, Harry, you can only have 10 million or 50 million.

[8:22](https://realalpha.app/v/1dwyL6Iz_PU/?t=502) Oh, you've never done a deck, have you? I've never made a pitch deck, yeah. Every round we've done so far, I like to get to know people well in advance of raising money. So every round we've done, I mean, most recently we announced the D round yesterday with Excel. I've been speaking to Rich and Gonzalo at Excel for, I think, at least a year. And at some point, you know, we're like, actually, you know what?

[8:44](https://realalpha.app/v/1dwyL6Iz_PU/?t=524) We could take some money. Like, what are the terms? Like, let's discuss terms. And then it happened very quickly because we already had that relationship. How do you think about price optimization? Is it a game of getting the highest price? No, I don't think so. I think maybe in later stages, it becomes a little bit more of a commodity, like the money itself. But I think in the early days, like, I mean, for several reasons, like one is that there's a misaligned incentive, like VCs always want to put in way more money than a company needs.

[9:08](https://realalpha.app/v/1dwyL6Iz_PU/?t=548) And that, you know, you just take on a lot of dilution. It's not good as a shareholder. But the other thing is like, you actually want to hold back, I think, and it's often better to raise a lot less money at a lower valuation, and then keep the VCs hungry for the next round. Is this not the generation, though, where actually capital is the moat, and you need so much more money than you think. You said that VCs want to give you more money than the company needs. I thought AI was finally the output exhaust for venture dollars that was needed.

[9:34](https://realalpha.app/v/1dwyL6Iz_PU/?t=574) I think there are times in the market where you are capital constrained. We have not been capital constrained for most of the time of the company. We've been extremely capital efficient. We burn only a few million a month. I mean, only like, you know, it's a lot of money. I respect for the money. You burn a few million a month? No, I mean, up until like last year. Now we have to spend a lot of money on capacity. How much do you burn a month now?

[9:53](https://realalpha.app/v/1dwyL6Iz_PU/?t=593) A lot. I mean, we actually are profitable on a P&L basis, but like cash flow is quite negative because we have to spend a lot of money on getting GPUs and building out capacity. And so that is a different period in the company and how we think about capital. Capital is, I don't want to call it a moat because, you know, I feel like people throw around that word like to mean like things that, you know, moat to me has like a very strict definition, but it certainly helps. Capital helps at this point. What's the moat definition for you? I mean, moat to me is like you go read like