Are you wondering how to raise startup capital?
Whether you’ve just had your “eureka!” moment and have seized on a great business idea you need to fund and you are working on your business plan, or you’ve already been putting in the 100 hour weeks and know you need an injection of some kind to make the next leap, how do you go about raising capital for your startup?
Do you know what you need to raise money at your stage in business? Have you explored all of the potential options? Do you have the right pitch and timeline? Are you pointing your business in the right direction?
Here’s what you need to know…
Bootstrapping Vs. Fundraising & When To Make The Switch
As I explain in detail in The Art of Startup Fundraising, many successful startups start out bootstrapping. Sooner or later, if you really want to scale and give your mission the best chance of its maximum impact you are probably going to raise capital.
You may need to do this out of the gate if your upfront cash needs are truly great just to make this idea work. Others raise in advance to bring in great advisors and backers, or to create buzz, credibility and hit the ground running fast.
Starting out bootstrapping can still have its perks. Just don’t sacrifice the impact you were really inspired by out of being stubborn and wanting to do it all yourself.
Several good reasons to start out bootstrapping include:
a) Preserving equity for later rounds, when you can raise more capital for fewer shares
When thinking about how to raise startup capital you need to be strategic. The earlier you raise the higher the risk for the investor. They will want to take a bigger share of your company and give you less money for it because your valuation is low. Raising later when your company is worth more means getting more money for a smaller slice of the pie.
b) Being in a stronger financial and negotiating position when you do go out to raise
The best time to raise is when you don’t need the money. Just like any loans or credit. When your startup can operate fine without extra capital, that’s when more investors will want in. Then they will compete with each other. You are doing them a favor with the privilege of investing in your company.
c) Proving the business model so any money put in gets a better return
A lot of extra money can actually be detrimental to early-stage startups. You feel like you have the luxury of time, spending and branching out. Most of the early money can be wasted on these things. Once you have a proven business model that works, you can raise and invest more money for predictable results and returns.
d) Staying focused on the mission and business versus the distraction of fundraising
Fundraising can take up 30% to even 50% of your time as a founder. Then subtract another 30% of your time for recruiting and hiring, and that doesn’t leave you much to actually work on and grow the business. Unless you are going to have someone else run the fundraising process for you, beginning by bootstrapping can give you more time and focus to really make the business work.
See How I Can Help You With Your Fundraising Efforts
- Fundraising Process : get guidance from A to Z.
- Materials : our team creates epic pitch decks and financial models
- Investor Access : connect with the right investors for your business and close them