When To Raise Money

A big part of my day is reviewing pitch decks and emails from founders looking to raise money. It seems like the first thing most people do these days when they start a company is pull together a pretty presentation and start hitting up investors for cash. Accelerator programs are graduating hundreds of new startups each year, many with limited revenue traction and all are trying to raise money the minute the program ends, or likely earlier.

Today’s Founder Coach advice is to tap the brakes on raising institutional money until you have some real traction to show to investors. Sure, you might be able to show me some examples of startups that raised millions when all they had was an idea on a piece of paper or a limited number of non-paying customers. I would challenge you to look really hard at the background of those founders. Did they go to Stanford, an Ivy League school, or some other elite college? Did they work at a major tech company like Google or Facebook or at a hot startup unicorn? Did you? Cuz if not, then raising money before you have traction is going to be really hard.

My general recommendation to founders is wait until you have figured out monetization at some level before you approach institutional venture investors. If you have a consumer app, maybe this means tens or hundreds of thousands of active users instead of cash flow. Otherwise you will spin your wheels preparing pitch decks and projections and will waste tons of time on calls with people that are just getting to know you for the future.

This is time you need badly to work on your product, your customer discovery, and your team. If you can’t convince customers to pay you for your product or service, then why would investors write you a check? Use this early time to build your company, and you will be much better prepared to run a successful capital raise process. As my co-founder Andre Fluellen likes to say, “What can you do to make a dollar today?” If your answer is that you can’t run your business without the capital, then you probably are in the wrong business.

Thanks for reading today’s post, I hope this advice helps you focus your energies on the right place for your business.