Should you raise VC investment?

💲 🚀 If you want to raise VC investment, perhaps you should consider these points before you spend a load of time and energy trying…

Are you ready to start raising?

it’s likely to be a long (expect 6 months) and be a tough process so it’s best to know what you’re getting into before you start and be ready to set aside a tonne a lot of time.

Do you have something impressive to get the attention of VCs?

Trying to raise before you can really impress VCs is likely to be a huge waste of your time when you should instead have been getting users/clients, building, aiming for early revenues etc first.

Perhaps your startup doesn’t fit the VC model anyway.

Unless your startup has potential to become valuable enough for it to return the size of the VC’s fund when you exit, it’s unlikely to be of interest so don’t waste time trying to raise from that VC fund (consider other financing options or get creative with bootstrapping). [e.g. for example, roughly speaking, a VC investor putting in $1m should see potential for your startup to return $50m to them if they have a $50m fund size. To keep it simple, and continue the example, if they invested for 10% of your startup’s equity, that means your startup should have potential to hit an exit valuation of $500m.]

Maybe a “lifestyle business” is actually what suits your life goals.

They’re called that for a reason…because they can offer a great lifestyle. Raising VC investment puts you on a path of extremely high expectations and pressure so you need to know what you’re getting into.

It comes with a 7 year time horizon on average.

Yes, 7 years. That’s how long it takes on average for a startup to exit after raising VC funding. If you’re a first-time founder prioritising speed to exit (wouldn’t advise this as a top goal) then VC is definitely not for you.

Summary

Raising VC investment as an early stage startup is like “strapping a rocket to a bicycle” (unknown quote origin).

If the points above haven’t made you re-think whether you’re ready, whether your startup is the fit for VC… and you’re in it for the long-haul to grow something absolutely huge, then perhaps going after VC investment is the right path.

I should add, I’m not against VC funding, I’m just against it being viewed as the norm due to the media attention it gets, when in fact the vast majority of startups are bootstrapped (either by choice or necessity). VC funding doesn’t make sense for most startups, so chasing it can waste both the founder’s and VC’s time.

You might find the London Tech Network (LTN) Slack group helpful (it has channels for investment, hiring, feedback, co-founder matchmaking etc). Apply here (only takes a minute)

Author:

Andy Milton

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