Your answer to when to raise venture capital for your startup might define the future of your company. Covid has brought massive disruption to the global economy in a new way. At least in my time, disruption has been driven by technology, not by sudden social changes that affect the entire globe. We need to rethink the role of building companies in such a volatile environment.
Remember, do not raise venture capital in the early part of your journey
If you asked me six months ago when to raise venture capital for a startup, I would suggest 100 ways not to raise capital in the early part of your journey. Raising capital needs a different skill set than building your company. It is expensive and incredibly time-consuming to raise venture capital, especially if you don’t have the fundamentals to show.
First, ask yourself if you are building a startup or a small business. Creating a global software platform to disrupt the financial industry is different from opening a bar. If you don’t know the difference, ask yourself if starting can generate a 40x Investment Multiple, a Venture Capital Investor is looking for. A software company can do that; a bar is limited by the customers you can fit regardless of how amazing your cocktails might be.
Your focus needs to be on how to get a product ready and generate cash flow. Period! So, let’s say you can get 20,000 Dollars together from Family and Friends to develop your app. You can come to Silicon Valley for one month trying to raise venture capital for your startup, or you can come to Bali and live off that money for 18 months where you design test, and release your app.
Don’t raise money unless you have a product to show and started building some revenue and traction in the market. Obsess about these factors, create a problem-solving solution that people will want to buy. With enough time and effort, you will always find that Eskimo that will buy a fridge from you. But that does not mean that you are great at sales; it just means that you are hopelessly wasting your time.