Startup Resources: Choosing the Ideal Time To Raise Money

By Fernando Berrocal

When it comes to funding a startup, there is one key question that entrepreneurs and co-founders around the world ask themselves: when is the best time to fundraise for my startup?  Since the world has changed in many ways in the last couple of years, answering that question has become a pretty challenging process. However, things are looking brighter with every passing month.

Startups Raising Money

The majority of VCs stopped making new investments in the spring of 2020 due to the COVID-19 pandemic, and switched their attention to the firms currently in their business portfolio.  Due to this shift, there was really no need for startups to hold fundraising events anywhere in the world.  That has changed dramatically since the pandemic wound down. Since that time, VCs have caught up and are now investing more than ever in many different startup businesses. To illustrate an accurate picture of the current state of funding, global VC investments increased by 40% as soon as during Q3 2020, and that trend continued to rise in the months that followed.

Thus, as a founder, you may be thinking this is the right time to start pursuing funds again.  Perhaps you’re also contemplating whether or not your chances are positive for venture capital (VC) funding. However, don't race ahead; try to move slowly but progressively in this scenario. You still have to make sensible time decisions despite the higher investment rate that we are experiencing in different industries. You must commit a lot of time to do a fundraiser campaign, time that could be better spent finding new customers or developing and upgrading your prospective product and/or service.

Venture Capital

Planning out exactly how you'll spend the money you have on hand right now is another crucial step to plan. If you raise money in three months as opposed to one whole year, you will invest radically differently in both scenarios. Thus, if you want to be successful, you must ascertain that fundraising will be a success before you even begin to do it. A bad fundraising attempt may easily figure the death of your startup as you know it. It takes a lot of work to raise money; it's not something you can just do out of nowhere. 

This is not an impulsive choice to make and the more thought you put into it, the better result you will obtain. You must have business momentum on your side. Increasing your product and/or service sales or the user base of target consumers are indicators of business momentum. An important new collaboration agreement can be also signed. It denotes completing a startup accelerator.

Investors do not desire to single-handedly carry you to a startup's ultimate victory. They want to continue traveling with you, and will evaluate your business efforts constructively. Giving investors the impression that things are moving rapidly will be crucial if you want them to feel confident about seeing a return on investment (ROI) in your business. Do you know why you want to raise money? You're not prepared if you say, "I just need business capital."

Choosing the Ideal Time To Raise Money

This can sound contradictory, considering that the goal of fundraising is mainly exactly what it sounds like: to raise funding. But early-stage business investors are not nonprofit organizations who aim to help any business they encounter. They add fuel to the already-running startup's engine to take it to the next level. They don't push from behind a disabled vehicle and expect nothing in return.

When you desperately need financial assistance, hearing that can be a major difficulty. Perhaps having that funding will make the difference between your business succeeding and failing. But if money is the only thing getting in the way of your startup's success, there might be other deeper issues. These last years have been a particularly difficult year for business entrepreneurs, as we are sure you are aware. However, during the last year, many firms in the travel, events, or hospitality sectors should have witnessed a ten-times increase in growth, but it just hasn't happened in some cases.

The best advice we can give you is to keep your head down and try to maintain your “flatness”. Prepare so that you can go out and raise money when there is a light at the end of the tunnel and client interest is increasing. We advise that founders start planning for raising a seed round 6 to 12 months in advance–not just three. Another type of funding can be pursued by obtaining a startup business loan.  You’ll find plenty of information about this route online. Startup business loans mainly include creating a ton of documentation, locating the best startup investors and startup team (remote or local) possible, and being ready for those crucial meetings startup owners face regularly.

Ready to bring your startup to the next level? Apply to MassLight’s next batch. MassLight supplies capital and a dedicated tech team. We take equity in return. Have questions? Refer to our FAQ page.

Pre Seed Startup Investor

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