Surprisingly, I've met people where the true equity cost was not well understood. The equity comes from three things, the money invested, the efforts of the employees, and the value created by that effort. As the company grows and matures, the benefit of that growth is bestowed based on 'equity ownership' not 'equity invested.' What that means is that if you've traded ownership equity for cash, especially cash you don't actually need, then your sweat equity is diluted. That time you're killing yourself on weekends to get the product just right to satisfy the customer that is going to take you to the next level, is rewarded in an exit to the guy that wrote the check, not the guy that did the work. All you have to barter with are 'shares' and the people most likely to make you successful are working for you. Equity that you give to a guy that writes a check is sets a 'value' on the act of writing the check. If you over raise, you're valuing 'cash' more than you are valuing your own and your employee's efforts. Not a choice to make lightly.

The opportunity costs are choices. If you raise $40M you're investors really aren't willing to see you 'exit' for just $80M, they will want you to go for way more than that. If you don't raise the $40M and someone offers you $80M for the company, you can take it and everyone benefits. Or another scenario, some very important strategic company wants to partner with you but this big equity load that is being held by VCs is a disincentive against future possible M&A activities.

Now this only discussed raising money that you don't need which is the case here. The author points out they needed some money, but the investors they talked to were trying to push them to take a lot more than they needed. The thing about bank loans is that their 'liquidation preference' is always very close to 1.0 and they don't tell you how to run your business if you're making your payments :-). That also speaks to control.