When is it time to raise capital?
Joe Procopio writes in this column for WRAL TechWire that "all the wrong reasons to seek investment are rooted in starting the fundraising process before the business is ready to capitalize on the use of funds."
“I’ve been building start-ups and helping build startups for over 20 years,” writes Joe Procopio, Chief Product Officer at Get Spiffy and Founder of teachingstartup.com, in this recent column for WRAL TechWire.
“And while I work for start-ups that have raised outside money, and I advise start-ups that have raised outside money, these days I don’t even go after an investment on my own unless I can prove, with revenue, that the idea doesn’t need investment to be viable.”
Procopio lists four more misguided reasons to seek outside investment and better alternatives for each. They are investment as (1) validation of the idea; (2) an activity; (3) market awareness; and (4) acceleration when there is really nothing to accelerate.
After offering his thoughts on each, he writes, “As you might imagine, all the wrong reasons to seek investment are rooted in starting the fundraising process before the business is ready to capitalize on the use of funds. These are strategic decisions that can move any start-up from the non-investable category to the investable category. The great thing about this strategy is that the longer you can wait to raise capital, the better chance you have to scale, and the more of your company you’ll end up keeping.”