When To Raise a Lot, And When To Not
A.T. Gimbel shares his advice on how much money entrepreneurs should raise.
How much money should you raise?
I often get asked by entrepreneurs about how much money they should raise. Sometimes the answer could be nothing when you first get going; other times it makes sense to raise some outside capital. What are the factors that go into that decision? There are different paths to startup growth, so a lot depends on what your vision is for the company.
This can be a good idea when you want total control of the business and to move at your own pace. For good or bad, there are no outside investors to push you in a certain direction. When you are still exploring the theme or idea, it is often better to find the authentic demand on your own dime and time versus somebody else’s. Giving up a portion of your company without even knowing what the company is can be risky.
Raising a little
Sometimes you are getting some early signs of authentic demand and need to take the next step in building the team or product. You may feel like you have several large deals in the pipeline that are about to close and would provide cash and better deal terms when you raise after they close. You also could have early signs of a sales and marketing process working but want to refine that approach further. Another time to raise a little is when you see rapid growth ahead and want to bet on yourself. You just raise a little bit now (which means less runway), but you are confident you will continue to rapidly grow and position yourself for a bigger raise on better terms soon.
Raising a lot
There are times when you feel the product-market fit, go-to-market processes are defined and working, and you know $1 in equals $5+ out. That is a great time to raise a larger amount of money because the payback is clear and you are just doing more of what you already know works. Another time to raise a larger amount is when you feel the market is hot and there are concerns the market/fundraising environment could quickly change. Take enough money now while you can to weather the storm.
There is no one right answer, but based on your vision, current traction, and opportunity you can select the best fundraising path.