At SI, we are looking to fund the companies as long as we can. Our rationale is that we rather have the management team focus on the operations of the company, rather than be distracted by fund raising. Fund raising can be a very distracting activity.
We have been asked why we fund companies even after spinning them off. We've been told that companies going out and raising funds on their own provides validation of the idea.
We don't agree with this. At the seed levels, validation from an investor is hardly validation. It's an opinion at best. At the early stages, success in fund raising is largely based on probability. The more people that you speak to, the better your chances are of raising funds. Since it is based on speaking to more people, it requires a lot of effort and hence is distracting. A positive aspect to speaking to a lot of people is that you get feedback. However, this feedback can also be distracting.
We rather the teams focus on market validation and hence, our preference is to continue funding up to a point where there is some market validation and the companies are ready to raise funds on their own.