Inside Small Business | Small Business & Home Business Marketing

Fundraising? It’s All About Timing

Brock Blake, CEO, Funding UniverseTandem Interactive

The Wall Street Journal recently sited Nate Alder and Argon Technologies for their successful capital raise in 2007, revealing that there is more to raising money than most entrepreneurs believe. Nate and his team are currently growing Argon with their newly acquired $350k investment, but they will be the first to tell you there have been a number of bumps in their road to financing. Nate faced rejection for nearly a year before finally participating in a Speedpitching luncheon and attracting investor interest.

At FundingUniverse, we help entrepreneurs build successful companies by providing education and connections to investors. We see hundreds of startup companies every week. If I were to guess, I would say that only 5-10% of startup companies are good candidates for an equity investment. The rest may need capital down the road, but it probably isn’t likely or advisable right now.

The best time to for startups to raise capital is when they have built a profitable business model. Once you have proven your business model, investors are exponentially more likely to make an investment. The worst time to raise money is when you desperately need it. If your company is in a difficult cash situation, there is usually another solution — bootstrapping. Bootstrapping will require you to make a difficult decision — downsizing your workforce, work from home, eliminating expenses, and/or work harder to drive sales – but it will pay off in the end.

So, before you go out pitching to every angel investor you see, spend some time thinking about whether right now is the best time for your company to raise money.

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Posted on Monday, January 14th, 2008 at 9:42 am and is filed under Entrepreneurship, Money/Finance. You can follow any responses to this entry through the RSS 2.0 feed.