Let’s Talk: When Is the Best Time To Invest?
Have you been funding your own company to date? Are you growing as fast as you need to be? In order to reach profitability, you may need to raise a significant amount of capital and be able to spend it at a high burn rate. Unicorns aside, the majority of startups cannot achieve long term success without outside funding from investors.
Fundraising will probably be among the most challenging things you will ever do as a startup founder. The process feels long, meticulous, confusing, and even humbling. Remember: you’re not alone. Virtually every single founder has traveled this uncharted territory before you and you will soon be able to pass the torch to the next generation of entrepreneurs. Besides, with funding comes opportunity and the chance to greater impact.
So, when is the right time to start fundraising? Am I too early? What is the proper valuation? And how am I to compensate my co-founders?
The best time to raise money is when you are ready to tell your story. When investors can empathize with your pitch and a story resonates with them- they will invest.
In addition to your compelling and credible story, you must be focused on developing a differentiated product and demonstrate market traction (i.e. customer adoption) to win the funding game. For example, the entire field of software development has slowly become commoditized – making right now the best time and most affordable time in history to start a new company. It’s also the most competitive. The idea and product also have to fit the intended target market, under the right lunar cycle, and the right time for their portfolio. Just about anything and everything can affect investment.
Finally, you need to learn how to impress and persuade investors. This means more action, more stats, and less guessing. Showing a rapid customer adoption rate at double digits is impressive, whereas showing a simple sketch on a Powerpoint of what may happen this quarter is risky. You should know every little detail and potential questions that an investor might ask in order to pick holes in your business model. Listen to your customers and continuously improve to ensure that the product is not only meeting but exceeding target market expectations to grow with double digits- building toward impactful KPI’s (Key Performance Indicators).