I missed writing last week. I was about to, but I never finished my piece. So here it goes - a week later. Last time I wrote about “The High”—stage one in a Capitaholic’s journey. This week, we’re naturally moving on to stage two, which I call “The Dependency.”
This is the stage where capital becomes the force driving the company forward.
Put bluntly: you’ve shifted from company-building to runway-building.

But before we dive in, let me share my now-traditional explanation of why the newsletter is late. I can’t keep blaming my torn Achilles tendon forever (even though it will haunt me for the next 50 weeks). But I can probably get away with it for this week as well - especially when the whole family has been home for two weeks with the flu.

Now, let’s also run through this week’s Capitaholic. Competition has been fierce.

They’re raising $475M at a $4.5B valuation. It’s the first piece of a total $1B round.
Founder Naveen Rao has a strong track record as the former Head of AI at Databricks - usually enough to justify a valuation that bends the laws of gravity. And of course, a16z is onboard this boat that still needs to be built if it’s going to float.

Their plan? Build AI that’s as energy-efficient as biological intelligence.
Basically ChatGPT on Twix and Coca-Cola.

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Venture Capital has become the new normal.
As a founder, this is where you spend most of your time. The people around you - your closest team - get to spend their time on product development, on customers, on actually trying to grow the company. For you, the first dopamine hit from the first round is gone. The focus has moved to your runway.

Everything probably feels like it’s going pretty well - just not explosively well.

I remember this phase at Binary Brains as a very positive and exciting period. We felt like we were doing meaningful things and were onto something. And we were. But we also had growth pressure on us, and that’s where we placed most of our focus. Those were the expectations we felt - and the strategy we had committed to ourselves:

Focus on growth. Profitability later.

I always had a sense that we could pivot to profitability quickly if we really needed to. Our burn rate never got out of hand. At worst, we burned $50K a month, and that felt both planned and manageable.
The problem is: when you’re in that mode, setbacks are no longer an option.

Dependency is when your strategy effectively becomes “Secure the next round,” rather than “Build a system that can survive without it.”

It is possible to raise capital without becoming dependent.
Being a Capitaholic is defined by crossing into this stage.
Once you’re here, it’s either the needle’s eye toward total success—or a guaranteed path toward the next three stages.

If you:

…then you are in The Dependency.

You can operate the company for a long time in this stage, and everything feels like success. You’re winning according to the KPIs you track.
But those KPIs do not reflect a healthy, stable company that stands on its own legs.

You only realize this when things start going downhill - when the hangover hits.
Until then, dependency is a very pleasant place to be, as long as you keep refilling the capital tank.

VC funds build portfolios based on the idea that a few companies become extremely large.
This means they want to quickly evaluate which companies have the potential to become a positive outlier, and then maximize that chance. They prefer “winner takes it all” strategies in markets where such dynamics make sense.

They achieve this by pushing founders to step on the gas as hard as possible.
It’s like starting to “stack” youth sports teams at age eight.
Those of us who have done elite sports know how many talents get missed with that strategy - and how many burn out. The same applies here.

It’s fail fast or win big.
But it’s the wrong kind of fail fast.

I’m a big advocate of failing more, failing faster, and failing forward.
But this kind of failing fast is misguided, because:

Dependency accelerates the selection process inside a VC portfolio.

Building for profitability takes too long for a fund to determine whether a company has “rocketship DNA” or not.
Burning money fast and growing at all costs - that’s the preferred path.

A kind of Darwinism, accelerated by Dependency.

The fact that funding is split into stages is a deliberate strategy to create this dependency and provide multiple control points along the way.
It allows investors to:

This structure creates control that doesn’t feel like control to the founders, since they still own the majority of their company.

But as long as they have a burn rate - the one investors expect or even demand - they are dependent on investor approval for the next round.
This makes them:

It usually works fine - until it doesn’t.

VCs can control the company without taking board seats, without micromanaging the founders, without owning the majority.
The control happens through the dependency itself.

Dependency is perfectly designed for VC portfolio strategy.
For founders, it feels good - right up until the hangover hits.
But strategically, it puts the odds against you.
VC funds don’t need you to succeed.
They only need a few bets to explode.

There is one rule.
It must be true 100% of the time:

The invested capital must never be, or become, what keeps the company alive.

Capital can be used for:

But that’s where it ends.

Once you start building a recurring burn rate, you are locked in - until you get rid of it again.
And that tends to be much harder than founders expect.

If you want to take in capital without becoming dependent, set a Capital Policy to ensure it happens.

Purpose:
Capital is used only for acceleration—never for survival.

Conditions:
We only raise capital if:

Principle:
We grow at the pace of our cash flow when the market is uncertain.

Stop rule:
If traction does not follow the expected value of the capital → we stop, pause, or scale down.
The ability to retreat must always exist.

Contract:
The purpose of the capital is written explicitly into the shareholder directive.

The most dangerous thing you can do is raise capital at the wrong time:

Dependency arises because the money becomes the only thing holding up the structure.

The right time to raise is when you can already stand on your own.
Capital should amplify something that actually works - not create the illusion that something works.

Many founders hide product or operational weaknesses by throwing capital at them.

And don’t forget to bring in the right investors - those who actually understand and agree with the strategy you intend to follow. Your long-term philosophy must match theirs.

If you fail to break the dependency before it starts - or before the metrics stop adding up - you will sooner or later, blissfully unaware for now, enter Stage 3: The Hangover. That’s for next time.

I hope you enjoyed this weeks piece. See you next week!

/Jacob Kihlbaum