Startup coach Dave Bailey is adamant that founders wait to raise venture capital. In a blog post, “The Dangers of Raising Venture Capital Too Early,” Bailey provides valuable insights into how venture capital can strap founders into a plan that will keep them from iterating and improving. When your company is still working out the details of its big idea, venture funding can be a mistake because it pressures founders to build a team and a business model before they fully understand their product and customers. If it’s possible to bootstrap your way to some amount of customer revenue, do it.*
Skills are your leverage at the early stage, not money.Dave Bailey, CEO coach*
Most investors agree it’s far easier to have confidence in an individual or team if you can see a trajectory of progress. But at the same time, many founders wait too long before meeting investors. If you feel like you aren’t ready to ask investors for money, it can still be a great time to meet them to begin building a relationship—you are, after all, signing up for a multi-year journey that potentially involves millions of dollars. “You ask for money, you get advice; you ask for advice, you get money” is another quip heard frequently in the startup ecosystem.*
danger Don’t fundraise right after a major failure.*
If your industry is cyclical, time your fundraising for the part of the year when your company makes the most money.*
important However you approach the logistics of fundraising, money has the power to distract you from everything else, especially when you really need it. Actively looking for investors can slow down growth, so be mindful of your resources.