Last week, I caught up with an entrepreneur, and we discussed a preemptive funding offer. The startup is thriving, growing rapidly in a large market with limited competition. Currently, the entrepreneur doesn’t need to raise capital, especially as key business metrics continue to improve. As the company grows, potential investors frequently reach out to build relationships before funding becomes necessary. The entrepreneur has started taking these meetings to connect with the venture community. After a particularly promising meeting, one investor offered a substantial investment at a valuation significantly higher than the last round. So, what should the entrepreneur do?

We weighed the pros and cons. On the pro side, accepting the offer provides time to assess the investor’s compatibility, ensuring the right chemistry and personality fit for a long-term partnership. The additional capital would support a more aggressive hiring plan, considering it takes three to six months to onboard and scale a team. This could accelerate growth and position the company for greater opportunities. Moreover, the extra funds could act as a financial cushion, offering flexibility to seize new opportunities without immediate spending pressure.

On the con side, raising money now at a higher valuation, when it’s not needed, reduces optionality. It sets a higher exit bar, which could complicate a future sale. Additional capital also brings increased pressure to grow and expand, which can be beneficial but may sometimes hinder the business. Finally, if growth continues and funds aren’t immediately necessary, the entrepreneur could raise capital later at an even higher valuation, minimizing dilution.

There’s no right or wrong answer—only an opportunity to reflect on priorities and goals. Entrepreneurs should build relationships with a select group of investors before their next funding round. Occasionally, these connections lead to preemptive offers, as in this case. When this happens, it’s an ideal time to evaluate the next round by listing the pros and cons of acting now versus sticking to the existing financing timeline.