Jason Jacobs of Runkeeper tells the story of his startup pre-acquisition to demonstrate that sometimes having a seemingly illogical vote of confidence is exactly what a founder needs.
"In the early days of Runkeeper, we were in our element and I was in my element as a leader. We were bootstrapped and profitable, and we were about as customer focused as one can get. And we were having fun!
Then, we raised a big round of venture funding. It was a $10m round when I think we had 12 employees at the time and didn't need the money. We raised it on a big vision (similar to what Apple is trying to do with HealthKit/Apple Health), but it was more a case of finding a story that was big enough to attract venture money vs. defining what we wanted to create and then determining the right way to fund it. We had great traction at the time and the vision really was a big one, but as a running app, it just wasn't ours to pursue (in hindsight).
The next couple of years were kind of a mess. We became allergic to revenue, ramped up our burn, hired as if we were going after the big health vision, but kept executing incrementally on the running app. It eventually pushed the company to the brink, and in late 2014 we were running out of cash, unable to raise an outside round of funding, burning a lot of money, and our numbers were good but not anywhere near the hockey stick they needed to be in order to be attractive to new investors. Especially at a big step up in valuation from our previous round."