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I don't completely understand the logic. After all, if they shut down, the VCs won't get anything, either. So why not keep it running and reap at least little rewards.


Once you take the funding, you have to spend it all on expanding operations, new staff, marketing, promotions etc. If you then can't generate a profit, unless you raise more rounds the increased expenses are going to kill your business. So in this case the VCs cut their losses instead of giving them more money.


Alternatively you should also cut your losses early.




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