So you have a great idea and a wonderful team that works day in and out. Perhaps you also have just the perfect market opportunities, and a striking operating system and you think the stars are aligned for you as the money in the market would not want to miss this opportunity.
But is raising money the easiest of tasks? Perhaps not.
No one will tell you, but we want to – that raising capital is an excruciating task. It is exciting, yes – but also threatening. The process is harsh and cut-throat. Obviously, you cannot escape the process, but it helps if you know beforehand about these challenges and be prepared for them mentally.
Therefore, today, let us take you through the top 3 harsh realities of raising funding –
- Raising capital costs a lot. Yes!
The process of raising money for the startup is stressful for the founders and even the core team – and can drag on for months as interested investors engage in “due diligence” examinations of the founder and the proposed business. Getting a yes can easily take six months; a no can take up to a year. All the while, the emotional and physical drain leaves little energy for running the business, and cash is flowing out rather than in. Young companies can go broke while the founders are trying to get capital to fund the next growth spurt.
What we suggest – The demands on time and money are unavoidable. What founders can avoid is the tendency to underestimate these costs and the failure to plan for them.
- Giving up can be risky.
Sometimes when there is no deal after months of running around and hard negotiation, startup founders become vulnerable and desperate. Tired, cash-hungry, and unwary founders, then, are quick to conclude any random deal as long as there is some money without taking note of the clauses. They often give up and relax the street-wise caution they have exercised so far and cut off discussions with alternative sources of funds. This can be a big mistake.
What we suggest – While it is tempting to end the hard work of finding money, continuing the search not only saves time if the deal falls through but also strengthens your negotiating position.
- The quest for capital never ends
Unless you self-funded with enough cash to cover everything and got into profit quickly enough to create a constant influx of brand-building power, you need to think about raising capital more than once. Sufficient money at launch can set you on a successful trajectory. However, to stay there and expand into new niches, markets, or opportunities, you need more money all the time. Raising capital makes everything from day-to-day operations to growth marketing possible.
What we suggest is – Try to manage and allocate each round of funding. Be cautious, work big on generating more revenue by making your product better. You should keep in mind that you cannot run your venture for years by raising funds. Aim to be sufficient.