First things first, Is there a universal answer to this question ?
My answer to this is NO.
Of course, you may differ and actually it is good to differ from having your own perspective. This question actually builds the pace and thought the process of your venture e.g. When, How, To Whom, and Why should you pitch to start raising funds ? If you can answer these questions, debate well with your co-founders or founding team clearly you might as well start raising funds there and then.
I have been in fundraising cycles with entrepreneurs many times and had my fair bit of failure and success but then this has been my own experience and it doesn’t make a universal statement. So I popped up this question in our strong 229,000+ global group of startups, entrepreneurs and experts in Startup Specialists Group so that startups might want to have a fair perspective how experts globally think :
So, When Should You Start Raising Funds For Your Startup?
There are some amazing myriad answers coming from across the world. Let me share some of the snippets.
Nischal Arvind Suryavanshi: “After prototype model is successful or at least first 50-100 customer served to understand your strength and weakness of your business model.
David Perlman: “There is no universal answer here. In some cases I’ve seen companies grow without ever taking in investment capital; they’ve grown quite slowly, and they have missed some opportunity windows, but the founders have retained the bulk of the equity and – importantly – control. In general, it’s wise to wait until you have (a) raised your valuation to a respectable level (ie. at least $5 Mn-10 Mn) and (b) proved that the dogs are eating your dog food (demonstrated acceptance in the marketplace).”
Johannes von Richthofen-von Gersdorff: “Well it all depends on what your startup does and what it needs to produce its product. If you have a great idea but not the skills or tools to pull it off, you need funding. If you do have the tools and/or skills to pull it off you won’t need funding. Additionally, it depends on how much time you have available. The least you should have in my opinion is a deck and team members that have the right skill st to pull it off.
And there came some more amazing insights to the discussion like what Colin Braithwaite added:
Shark Tank has done a huge disservice to many wannabe entrepreneurs. Sure it starts with an idea, but that idea has to be translated into a plan and then into action. A plan will give you insight into what your capital requirements may be. Whatever you project, will be wrong, but it is a starting point.
“Whatever happened to good old fashioned bootstrapping? I hear way too often, I had a great idea, but couldn’t get funding. Perhaps the idea was not so great. Good goes to good, by definition investors invest. They are looking for a good financial opportunity that makes sense to them.”
And there was one fantastic point that Rajat Srivastav added: “The first question to be asked is whether a company even needs to raise funds or not? The initial focus should be on building the foundation (core) of the product to be as bug-free and stable as possible. This can be done in an iterative way starting with an MVP. During and after each iteration, the sale of the product is also important.
In the middle of the awesome discussion Daniel Curran virtually took the cake!
Assuming a billion-dollar market, you will need funding, so seek after you have a 4-month bar chart of hyperbolic growing users or revenues…that gets angels and VCs salivating 🙂
And a fantastic practical point added by Robert James Sherwood:
12 months before you need the money.
The discussion is still on in the group and experts are sharing and inspiring entrepreneurs to give their thought process on the best way forward.
[This post by Ravi Kikan first appeared on LinkedIn and has been reproduced with permission.]