Y Combinator Partner Advises Against Mentioning Acquisition Offers in 99% of Fundraising Scenarios

Aaron Harris, a prominent partner at startup accelerator Y Combinator (YC), recently shared pointed advice for founders navigating fundraising rounds: refrain from disclosing acquisition offers to potential investors in most cases. This guidance, shared via social media, challenges a common founder misconception about leveraging such offers.

Harris's counsel emerged from a question posed by Jacob Dennis regarding the strategic utility of mentioning acquisition offers during fundraising. Harris firmly stated, "> 99% of the time, no." He elaborated that founders often mistakenly believe an acquisition offer will generate "FOMO the way a term sheet would."

The veteran investor explained that venture capitalists (VCs) typically react differently to acquisition prospects than to competing investment offers. "> VCs aren’t generally threatened by acquisitions. They’re threatened by other VCs stealing their lunch," Harris noted. He added that when founders mention an acquisition, investors frequently interpret it as a signal that "> we want to get out early," suggesting a lack of long-term commitment.

Industry perspectives on this topic can be complex. While some argue that disclosing a strong acquisition offer might validate a company's desirability and create urgency, experts also caution against the perception of desperation or an uncommitted long-term vision. Harris's strong stance underscores a prevalent sentiment among VCs who prioritize founders dedicated to building substantial, enduring companies.

Y Combinator, known for its pivotal role in early-stage startup development, frequently offers direct and often counter-intuitive advice to its portfolio companies. This latest guidance from Harris highlights the nuanced psychology of venture capital fundraising, emphasizing that founders should align their narrative with investors' core desire for significant, sustained growth rather than quick exits.