It is almost unbelievable how amateurish most small companies are at raising capital. Luckily there are ways to fix this.
I’ve been involved in more than a dozen companies over the last decade. Usually from the very beginning as the companies were founded and found their initial traction, but also at later stages when companies were established and in pursuit of ambitious growth targets. Most of the companies are tech-related but with very different value propositions, catering to different markets and customers. The one thing they have in common? They have all been raising money at several stages to fuel their growth plans. What strikes me is this: It is almost unbelievable how amateurish we have been at raising capital. Sure, we’ve managed to get funded, but at a high cost and via painful processes. Raising money seems to be a universal headache for businesses. Despite that, businesses’ approach is usually haphazard.
It doesn’t matter if your business is a brand-new start-up, or a more mature company. If you have ambitions and want to grow to grab the market share your company deserves, you need funding. And more importantly, as I have experienced again and again, funding your business is not a one-time thing.
Starting a company obviously requires money. Your product or service isn’t anywhere near ready, but your costs are piling up — salaries, office rent, etc. Or maybe you’re further along, but need to hire for growth, but that always means front-loading costs. Or perhaps you have stumbled upon an acquisition opportunity?
My point is simple: If you are a company with ambitions and growth plans, funding is always a part of the equation. Despite the fact that this is perhaps the biggest commonality between small and medium sized businesses, they are notoriously bad at it.
What does this mean?
It means that most of the time, fundraising is an unnecessarily painful process, creating delays, destroying overall momentum, and shrinking existing shareholders’ value.
The need to raise money seems to take us by surprise way too often. We are unprepared, start too late, and often end up with either no money at all or the wrong money from the wrong investors, on the wrong terms.
Here’s the key: You need to approach fundraising as an ongoing activity. You need to start now. You need to realize that planning and preparing for fundraising is an ongoing process that never sleeps.