Watch: When is the right time for a founder to raise?

When is the right time for a founder to raise?

Mark Zmarzly, Startup & Venture Capital Business Development Manager, Amazon Web Services (AWS)
You know, always be closing, as Alec Baldwin says — you know, always be selling. You should almost always be kind of fundraising, at least not necessarily taking checks, but always be kind of putting out those feelers and stuff too. And you’ve got to be prepared. It’s the hardest thing you’ll probably ever do. It might even be harder than actually being a founder of your startup.

Rachel Yang, Partner, Giant Leap
There’s never really a right time for a founder to raise capital from investors because it’s not a cookie-cutter approach. I would say the right time is when you personally think that you need the capital. You’ve got enough runway so you’re not stressed to be raising at a time where you really need the money right now. It’s really about being strategic. So the right time is unique for every individual, and it’s really about: do you have product–market fit, or do you really understand where that capital is going in order to drive that growth? It’s not just about raising capital for the sake of raising capital.

Thea Ngo, Investment Analyst, Archangel Ventures
The right time to raise capital is when the capital that is brought to the table can catalyze your growth, and that’s deeply intrinsic within the individual company’s life cycle.

Ben Armstrong, Managing Partner, Archangel
I think you need to really know that you’re ready to raise capital. So it’s fine to have conversations with people before you’re ready to raise capital, but don’t fall into the trap of having conversations where you’re expecting money and you’re asking the wrong questions. So you need to know what you’re going to do with that money when they ask, and then they’re going to probably stretch you by saying, “What if you had twice that amount of money, or what if we gave you less money?” And so, you need to be prepared for that answer.

Kate Coffey, Investment Manager, AirTree
What’s important is that there’s some evidence to support what you’re saying. So that might be that you’ve got a reference that has a really good review of working with you if you’re at the early stage, or if you’ve got some customer signups, a strong pipeline and a wait list if you’re early stage again, or if you’ve got some really good numbers and revenue supporting you. That works too.

Nicole Kleid Small, Partner, The Planet Fund
Before you need it. Too many times have I seen founders come and say, “I have a one-month runway and I need a raise right now.”

Jason Ming, Cofounder & Managing Partner, Trampoline
I think sometimes founders focus too much on raising to survive as opposed to raising to grow. And for us as investors, we’re always trying to almost de-risk the opportunity in a lot of ways, and we want to see the optimism of an investment opportunity. We want to see how an investment is going to return. And so really the focus being much more on what is your growth strategy as opposed to what have you achieved today.

Paul Naphtali, Cofounder & Managing Partner, Rampersand
The right time to raise an investor is right now. It’s a golden period. There are some great investors active in Australia. Do give it some time whilst the market’s actually pretty good. It’s always better for you to have built a relationship beforehand. My probably one piece of advice is: move really quickly on your business, but move slowly to develop an understanding of who you’re letting into your business and get to know them first. Ask them what happens when things go wrong. Speak to the founders back before: what happens when we missed a number? What happens when we wanted to change? How do they deal with tough news? So understand the relationship, and the more predictable the reactions, the better for you as the founder.