The real question you need to ask before deciding to raise capital.

by fudgemin. Posted on Sep 12, 2020    8    2


Not bashing the recent post. Just want to clarify something, my own opinion.

Startup's come in all shapes and sizes. Mainly related to tech or product sales, but reality is it can be any businesses with potential to scale rapidly and reach a large target market. It could be a junk removal company, a painting company, food delivery, seo, space exploration, military tech, literally any number of those industries. Lot more out there then silicon valley

VC's also come in all shapes and sizes. For every single VC firm with a 1 billion dollar fund, there are 10 more with 100mill fund, 1000 more angels investors with 10m and 10000 more unlisted high net worth individuals willing to invest millions. There is no one mold fits all.

Every situation is unique. Every business, each investors. So their is no definitive time when you need to raise funds. It will vary greatly given all circumstances.

There is one single question that you can ask yourself, every question after this could be considered situational:

If i was to raise outside capital, can I use the funds to generate revenue that will outweigh the expected loss?

Capital comes at a cost, generally equity. Equity carries value...present and future. Its a trade. If you know exactly how you can use those funds to generate revenue, then you may be ready to raise and have enough required to convince an investor.

Of course there is so much more, but its all situational. Timelines will be different, amount's required, industries, traction's goal/achievements, what the potential investors want's from you, how great is your team, etc etc. There is no handbook, there is no 'correct' answer.


Comments

LogicalGrapefruit 5

Bootstrapping is underrated. Gets less attention because the people with money have no interest in drawing attention to it.

MaxPast 3

I launched several businesses, most of them were bootstrapped, some other came with a little seed funding from my savings/partners. I must say that even a little amount of money in your pocket that adds extra 3-6 months of runway can make a huge difference because everything takes time. So, it's not a question of saving or losing money, it's a question of survival, mostly.

On the other hand, money alone will not make a lot of difference. It's better if they come with third-party marketing skills - that's how I got my most successful launches at the very beginning. If there are nobody who knows how to market the product, learning it will take even more time than its development.

So, in short, it's a good idea to look for outside financing but only if it comes with some kind of marketing expertise.