Should Founders Start Raising Money Early?

There are different, sometimes better, places to start raising money.

I met a founder who has a consumer product this week and wanted introductions to some local VCs. She was not ready for a VC, but it made me think about how often this happens. When founders have a startup and they think about raising money, most start thinking about VC’s or Angel investors. Most founders are not ready to raise money. But they start reaching out to people to help them connect with investors to raise money. They polish up the pitch decks and go forward into the time-consuming process of raising money from the Venture Capital community.

Only about 6% of startups raise VC funding. (Click to tweet)

There are alternatives to going down the VC route. You may want to consider Angel Investors. Maybe even a strategic investment from a big customer. If you are a SAS based business you could consider revenue financing from Lighter Capital.

If you’re in a squeeze for capital and you have a solid, mutually beneficial relationship with a VC, your chances of raising will increase dramatically. -David Cohen

Most people will start right away talking to VC’s. If you are truly trying to align yourself with your investors, you should watch the video and learn at least one option. I recently had a conversation with Rand Fishkin about the alternative they used in raising the seed round for Sparktoro. Here is an explanation from Rand on the 1.3M round. It makes a ton of sense for more companies to do this. Watch the video to learn how they did it. Here is a more detailed blog post about it from Rand.


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