Nothing is more painful for me to watch then a CEO that has waited too long to raise funded. It's a self inflicted wound that you can easily avoid. Yet I see this happen over and over again.
I've raised over $100M, so I do have a little bit of experience in this area. I'll share my thoughts on when you should raise money and how long your should last in this short video.
Read The Video Transcript Below:
I'm kind of amazed sometimes because I get this question a lot about when is the best time for you to raise money? You know, "What are the best times?" "When are VCs available?" You know, for example, it's the summertime and maybe I should wait?
You know, we're getting into winter. Maybe I should wait? My answer is always the same. Never ever, ever wait because there's no perfect time. There are better times than others, but it's not like the world 100% shuts down.
Let me give you an example of this. We had to raise money over the summer.
Now, we had a choice to make. Right? We could've stopped. You know, it could've waited until the fall when everybody was, was done with their vacations, but we decided not to because some VCs kept working.
So yeah, things slowed down. Deals took longer to get done, but magically we ended up getting term sheet after term sheet during the summer. You go, when you're ready,. There is no perfect time and you never, ever, ever want to wait.
Now, here's why you never want to wait because you never know what's going to happen. There's so many dynamics that can kill a business and a common theme. In fact we were having dinner with some friends, and and the husband of the husband and wife team, he was also doing some angel investing, and we were talking about the frailty of how fragile startups are.
And you just have no idea how fragile your company is and how many things can knock it off track. For example, maybe the economy changes? You know, right now here in the United States, we're talking about a recession. What happens if we have a recession? Guess what? Money gets harder and the deal terms get worse. What happens if for whatever reason your business slows down unexpectedly and it's more difficult for you to raise that next round of funding? What are you going to do?
You just don't know what's going to happen. So give yourself time. At least if you're doing the work right, you should always be planning. You should always be looking at your cashflow and your financial analysis. A minimum of six months before your cash runs out you should be starting to raise your funding, preferably one year.
Now, why one year? Well, and why six months? Let me tell you from my personal experience of raising money, I've raised over a hundred million dollars in my career, so I've raised a lot of money. It usually takes around six months.
If you give yourself a year, you have buffer because when you get down to having one month of funding left or three weeks of funding or two weeks or one week, you get the idea. Guess what happens to the deal? It gets worse because investors can smell it on you.
And the minute they smell it the deal's going to get worse. So give yourself time. Unexpected stuff happens all the time in this business. Be prepared for it.
You just don't know what's going to happen. But by going out early rather than late, you're giving yourself the best chance of being able to raise money before you run out. And that would be a catastrophe if you run out. I'm Brett at www.BrettJFox.com have a great, great day.