Ronda de financiación o bootstrapping

In the era of VC kingmakers, every startup wants investors. An impressive Series A round of funding gives companies sex appeal and street cred, so why wouldn’t every founder be hot for it?

However, the realities of fundraising show it’s not right for everyone. Unicorns dominate the funding narrative and receive backing from valuation-insensitive firms, but that’s not the norm.

Most companies are better off bootstrapping or taking small seeds with favorable liquidity terms. Unless your product can be commoditized or you’re in a high-growth, high-barrier market, funding shouldn’t be the first option.

Once you take VC money, the pressure to manufacture growth can sink the whole startup. If your company isn’t built to scale to investors’ expectations, you’ll either compromise your vision or risk upsetting the people to whom you owe millions.

Beware the Cult of the Entrepreneur

In my seven years of entrepreneurship, founders have gained cult status. Some self-select around doing big, audacious things that require significant funding. Those are the headline-grabbing cases, but most entrepreneurs quietly run great businesses with small teams and little fanfare.

Before you look for funding, consider why you need it. If you can’t come up with a solid justification, hold off. When we built our company, we sought funding because ours is a capital-intensive business. As a financial-services startup, we required a big team that could navigate regulatory obligations without revenue as we went to market; VC funding made sense for us.

A good way to determine your needs is to ask how far you are from a breaking-even point. If you can get there without investor money, that’s the way to go. As a co-founder of a startup incubator, Paul Graham recommends this startup growth calculator to determine whether your business is “default alive or default dead.” The answer affects how you’ll position yourself if you do approach investors.

To Fundraise or Not to Fundraise

Simplify the fundraising decision-making process by considering what you want to achieve. Many entrepreneurs build profitable online companies that become passive income sources. External funding is unnecessary if that’s your goal. If your ambitions are bigger, however, you may need investors.

It’s important to understand your liquidity options before you fundraise. Let’s say you want to open a café and need investor capital. At some point, that money will yield diminishing returns, and few people will want to buy a café at a 20-time multiple. You need to make sure there are acquisitions in your space to ensure an ROI for your VCs.

Dig around and look at the acquisition values for businesses similar to yours: What are the projected multiples at different stages? Find the acquisition tools in your field, and reverse engineer your potential outcomes. Once you know your probability of success, you’ll have an answer as to whether you should seek funding.

If you decide that fundraising is the right option, use the following strategies to position your company as an attractive investment:

1. Gather intel.

Meet with people you respect, and ask them to critique your idea. What are the missing pieces? What scares them off? Honest feedback about your product will indicate whether it’s marketable. If you disagree with their criticisms, proceed as intended. If they make valid points, however, continue to revise.

After you have that foundation, use technology to determine market potential. Calculate lifetime value (LTV) versus customer acquisition cost (CAC). LTV should be higher than CAC before you approach investors. They’re interested in how you’ll attain profitability, and you can’t become profitable if that equation is off.

2. Consider the build of your company.

Research the investors you want to pitch, and find the common threads among companies they’ve backed in the past. Be honest about whether your startup is ready to meet with these VCs. If it is, run online simulations to showcase your company’s ability.

When my team and I raised seed funding, we already had deals with Visa, a bank, and other partners. We also conducted customer-acquisition experiments in parallel with our fundraising process. This enabled us to demonstrate our projected acquisition costs and growth based on real numbers, which helped investors believe in our trajectory.

3. Build VC relationships before you fundraise.

Don’t wait until you start fundraising to contact VCs. Keep a Google spreadsheet of all the investors you plan to pitch, updating it periodically as you encounter new firms.

Six months out, share occasional updates and press releases. This establishes the relationship through a light-touch track record of communication. A transactional approach of walking in cold for a pitch will hurt your prospects.

Even if you don’t plan to fundraise yet, use the spreadsheet method to track investors and find opportunities to build a rapport. Should you decide to fundraise down the road, you’ll already have a solid jumping-off point.

4. Figure out what makes your VCs tick.

I’m always surprised entrepreneurs don’t spend more time investigating what motivates potential investors. They launch into their stock pitches without accounting for each investor’s interests and expertise.

Before scheduling a meeting, research investors’ backgrounds and tailor your presentations accordingly. Take 15 minutes at the start of the meeting to chat about what their expectations are.

The prospect of big investor backing is exciting and glamorous. But beneath that shiny veneer are steep expectations that most startups aren’t prepared to meet. Make sure you fundraise for the right reasons and that the move will benefit, not jeopardize, your company.