Timing Your Fundraising Efforts
The real reason everyone is racing for capital at the end of their runway.
Timing is something that many founders aren’t able to use to their advantage. As the founder of a company you should be thanking both about today, but also about what the company looks like five years from now, and as a result it should never be a surprise that you are running out of money. However time and again I hear of, and speak with founders who need money within either a couple of weeks or a couple of months.
However they don’t take into account for some reason that raising an equity round will likely take 3-6 months at a minimum. Therefore, founders should be planning for 6 to 9 months of fundraising in order to account for the process of bringing investors along, getting them comfortable with your company, letting them see the development of the company overtime, validating your growth metrics and generally speaking, building a relationship.
On the other hand, non-dilutive capital can often be sourced on a much shorter timeline, however the requirements to do so are much more quantitative and strict. And just as you’d expect, there are certain requirements you must meet and documentation you must have in place in order to obtain the type of Financing.
Furthermore, timing should not be the driving factor behind what type of financing you obtain. Running out of time and then turning to the debt market in order to obtain some growth capital is the last thing you want to do. Instead you should be reviewing the trajectory of your company as far out into the future as possible, and then determining the optimal type of financing you’ll need in order to hit the growth rates that you’re aiming for, and or achieve the personal lifestyle outcomes that you are optimizing for. Once you understand the ideal type of financing for your company, try to tweak the variables that are a factor in obtaining it, and plan far enough ahead that you can both properly apply for the funding, and also allow for the inevitable delay you’ll face when working to obtain it.
Why is it that founders are always running out of time? My hypothesis is that they do actually see the need for capital coming down the road, but avoid the emotionally difficult process of pitching for / applying for it. It’s a very complex calculation and founders are generally optimistic to begin with, o inevitably they lean on that optimism and avoid a difficult process which involves risk, being vulnerable, and involves people being directly critical about your business. This is why we are in the process of building a platform to help abstract this process away from founders and make it less personal, more data-driven, and to create better outcomes for everyone involved. We work to obtain capital on your behalf and, eventually, will allow you to download capital the same way you download a PDF: with one click, and zero worries.