Many questions have been answered and some have been left unanswered. However, many young entrepreneurs and startups have a hard time deciding weather to raise funds for their business or not. This article will give a specific narration of reasons why you should either consider raising funds or not.
Murray Newlands have bootstrapped several companies and successfully sold them. In the past, he have raised money for some companies, as well as turned down money for companies. He advised some of VC funds in Silicon Valley on investing and have even written a guide on how to get funding for your startup.
If you were able to develop your company without raising money, then you own the whole thing and can make all the decisions you want without being beholden to someone else. If you happen to raise money, someone else owns part of your future company or company’s future, which will impact your decision.
Here’s why I sometimes chose not to raise money for some projects:
The projects just didn’t need it.
Yes, they took a bit longer, but I was able to fund them myself from my savings and consultancy and marketing work. I answered to no one and I kept the full value of the upside of my services when I sold them.
Raising money takes much time and effort.
Raising money is usually hard work and takes so much time and effort. Many of us as startups spend too much time on early fundraising; if we focused on the company, we would have a more successful startup and might not even need to raise money.
Raising Money comes with strings.
Do you (or) want to have full control over your company? When you raise money, you make different promises and investors have expectations. You will have to answer to someone else for your decisions, which can be hard to live with in a startup that changes, sometimes a lot, over time.
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What will happen when you fail?
You will have to believe your startup will succeed or why do it? What will you say to your investors when it doesn’t work? Maybe your investors are friends and family, can they afford to lose money?
However, there are also good reasons you and I can choose to raise money for our business:
If some projects are bigger than you.
Some projects turns out to need more money than you currently have and need a bigger team than you can assemble. If you have to hire more staff who are going to take a long time to complete a big project, you may need to raise more money.
Timing is important.
When a certain market is hot, you may want to capture as much of the market as possible; oftentimes, you can only do that with investment money. In (some) many markets, it is a reality that you may end up with one or two dominant players. By getting there early, you end up winning.
Investors can add more than money.
Some investors might help you get deals with other portfolio companies with which they have connections. Right investors can make a startup with their connections. If your clients are or will be Fortune 500 companies, having brand-name investors can help reassure them your small startup is worth considering.
The bigger the be better.
Having 20 percent of a billion-dollar company is better than having 100 percent of a $100,000 company — if you only want money. Some other people would prefer having a smaller company that they fully own and that meets their lifestyle.
In general, the further developed your startup, the stronger position you’re in to raise money, which means you will have to give up less equity. However, raising money usually takes a bit longer than you think, so don’t start too late. Build strong relationships with potential investors, as they can give great advice even if you end up not needing them. If you need investments, it’s better to know specific investors before asking them for money.
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Ask yourself this: Would i be more likely to invest in a founder with whom i’ve formed a relationship or a random stranger who sent me a pitch deck?