Tranched rounds began as a sound way to separate value-adding capital from cheap capital, but have spread to companies regardless of quality. Listen
Ganesan described the original logic as taking 'build with me' money at a low valuation and then raising pure capital at a higher valuation. He said that, as in every cycle, the innovators were followed by imitators and then 'idiots', so the technique is no longer tied to company quality.
“in every cycle you get the innovators, then you get the imitators, and then you eventually get the idiots.”
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