Originally posted on Marathon.

We frequently encounter the following train of thought by founders: “I’m raising a seed round of one million. I haven’t found my lead investor yet, but we are close to having {Sequoia} to join the round with a small amount, say, a hundred thousand or even half of it. I don’t really care about the amount per se; what matters to me is getting them on board early, so they track our progress closely, and I can publicly use their name. I’m pushing a lot towards it and –fingers crossed– should we finally make it and be {a16z}-backed, this is the best thing that can happen to us, and I’m totally excited about it!”

Of course, you may replace SoftBank / Sequoia / a16z / you-name-it with any other top-or-not-tier fund, which typically does Series A / B / C rounds, but now is for some reason willing to participate in your seed. No matter what the incentives on the fund’s side are and whether such participation materializes or not, this is what we believe about it: Getting a next stage fund to participate in your seed round does not serve the long-term interests of your company. Here’s why:

a) “They will closely follow us”: Well, no. A $100 million fund investing $50 thousand to your company is the equivalent of you giving $10 to your niece. You may well spend a lot of time with your niece, yet this has nothing to do with the amount you gave her. Similarly, say, Benchmark or Bessemer will be following you if they believe they can put $10 million at work with your company, everything else being irrelevant, your seed round included.

b) “We can use their name”: For those in the know, i.e., the ones who truly matter for your endeavor, this will hurt your credibility, not enhance it. People are aware that, say, Accel or Kleiner Perkins don’t do seed; claiming they did in your case won’t make people question what they already know about these firms, it will question your legitimacy instead. I’d go as far to say that, even if they did participate, it is probably better not to make too much fuss and avoid getting a lot of questions about it.

c) What if they won’t lead your next round? That is the big question. Participating with a significant amount is why you brought them in the first place. Now they are passing. And the short answer is you will be in deep trouble. New investors, you will be approaching will be making that question. No matter what you reply, they are going to be thinking that insiders know more about the company than they do, and there is a reason why they are passing. They have heard the standard replies of why this is happening a lot of times; they will not be convincing. This is a tough situation to be in; your next round just became twice more difficult.

After all, you will be exchanging your chances to succeed in the long term with a questionable claim to fame. We believe you’d rather not. Pick the best partner you can get at the right time for each round, and maintain an arm’s length relationship with those parties that can take the lead in your next fundraising. Then focus on building your company, and the rest will follow. SoftBank can wait.