Funding is one crucial aspect of the journey of building a tech startup or any business. Being able to pay staff, build out your product, market, grow your team, etc. all requires cash, well, almost all. Funding helps companies to scale, expand, and achieve their long-term goals. Founders need to understand the right time to start seeking funding, as well as what they need to have in place before they start the process. But, when should you raise funding? This is a common question from just about every founder I meet. The answer is, and always will be - IT DEPENDS!
Many Founders, especially at the pre-seed stage, will not like this answer, but…it depends on the specific circumstances and goals as a founder and your startup. However, in general, you should consider raising funding when:
You have validated your business idea: Before seeking funding, you must have a clear understanding of your target market and whether your product or service solves a real problem for your customers. This can be achieved through market research, customer feedback, and developing a minimum viable product (MVP). An MVP is a simplified version of the final product that allows you to test your idea in the market and gather feedback from customers.
You have a clear understanding of your target market and a scalable business model: A scalable business model means that the company's revenue and profits can grow quickly and efficiently as you expand your customer base. It would be best if you had a deep understanding of your target market and their buying habits, as well as a clear plan for reaching and retaining customers.
You have a well-defined go-to-market strategy: By now you should have a clear strategy for launching and promoting your product or service, including the channels you will use to reach your target market, the budget required, and the expected return on investment.
You have assembled a strong and experienced founding team: Investors are often more likely to invest in a company if the founder has a solid team in place. The founding team should have the necessary skills and experience to execute the company's plans and bring the product or service to market.
You have a clear vision for the future and can articulate it effectively: You should have a clear vision for the future of the company and be able to articulate it effectively to potential investors. This includes the company's mission, values, and long-term goals. You should also be able to demonstrate how the company will create value for customers, generate revenue, and grow over time.
This shouldn’t be news to you - fundraising is a time-consuming and resource-intensive process. As the founder, you should only start seeking funding when you have a solid plan in place and a clear understanding of what they need the funds for. You should also have at least 12-18 months runaway, including capital related to the execution of your fundraise. Be prepared to spend a significant amount of time networking, meeting with potential investors, and negotiating terms.
Another reason the timing of fundraising is just as important as the amount raised, as it can affect the company's future trajectory. If a founder raises funding too soon, they may not have a solid foundation in place and struggle to grow the business. On the other hand, if they wait too long, they may miss out on valuable opportunities and risk falling behind the competition. By carefully considering these factors, you can increase your chances of success in securing funding and achieving your long-term goals.
There are so many moving parts when it comes to fundraising, so it's no surprise that Founders find themselves overwhelmed and confused.
If you need help we do have a number of ways we can help.
Be your mentor: We'll be there to guide you every step of the way, sharing our best practices and avoiding any common pitfalls in the fundraising process.
Connect you with the right people: We've got a network of awesome investors, venture capitalists, and other key players in the startup world that we'd love to introduce you to.
Get you pitch-perfect: We'll help you prepare the perfect pitch and investor presentation, so you can confidently communicate your vision and goals.
Open doors to funding: We'll connect you with a variety of funding sources, including venture capital firms, angel investors, and crowdfunding platforms.
Immigrate to explore new markets: We can help you immigrate to Canada as a startup Founder/Investor as well!
Help seal the deal: We'll be there to help with deal sourcing and negotiation, from reviewing term sheets to closing the deal.
Stick with you for the long haul: Our support doesn't end once you secure funding. We'll be there to help you secure follow-on funding rounds and continue growing your business.
So if you are serious about investing in yourself, and you're ready to take your funding journey to the next level, let us help!
We do not provide specialised accounting, tax, or legal advice. The information provided in this guide is for informational purposes only. Before taking action based on any of the provided content, it is recommended that you consult your own professional advisors.