When should you start fundraising? Probably sooner than you think
Fundraising for anything can be an intimidating and frustrating process, especially when it’s your first time around. There are so many variables that you have to take into account: When should I start fundraising? Who should I talk to? What valuation should I use? How much money should I raise? What kind of money should I take? And about a million other things.
The first thing to keep in mind is that the entire fundraising environment has changed over the last several years. With the rise in popularity of startups, has come the rise in popularity of angel investors and family offices. This means that you can pick and choose who you involve in your company and you should take advantage of that. The number one advice I can give to anyone raising money is do some real diligence before you take anyone’s money because, as the saying goes, doing business with someone is like marrying them.
The best way to ensure you aren’t put in a position where you have to take a deal you aren’t comfortable with, you need to start raising money at the right time. One of the most frequent questions I get from entrepreneurs is “when should I start fundraising?” The answer, most likely way before you think you need to. Entrepreneurs, more often than not, underestimate the time it takes to fundraise and how many obstacles they’ll encounter during this process. A cliche in the startup world is that the CEO should always be fundraising, and I agree with that, but not why everyone else does.
The best source of fundraising is sales and the CEO needs to be out there selling their company to everyone and anyone because you never know when it might lead to something. I’ve seen several million dollar Series A rounds get filled in a matter of weeks because of all the heavy lifting done during the hunt for the seed round. As a general guideline, seed rounds can take up to 3–6 months to close and Series A rounds can take up to 9–12 months to close. Keep in mind, every company is different and depending on what the “industry of the month” is, this could vary.
By far the most important thing to remember when you are fundraising is, don’t get frustrated. There will be deals that fall through, investors that verbally committed who back out, and partnerships that seem to disappear into thin air. Believe in yourself, believe in your team, believe in your product, and do right by your customers. If you do that, everything else will fall in place.