Raising investment

Entrepreneurs often start their venture through savings, and dwindling savings makes anyone anxious. Raising external investment is thus an early goal that most entrepreneurs set for themselves. However, we find many entrepreneurs chasing the goal as a primary one and lose sight of the overall business that they set out to build. They get so attached to the intermittent goal that the end goal of building the venture is off their radar. If there is no business, what are you really raising money for?

When is an apt time to raise investment then? If you are to go by the advice of lean methodology in building a venture, the appropriate time is when you have accomplished a product-market fit and ready to scale up. The goal of an entrepreneur before this point is to accumulate validated learning that ensures that the assumptions of the business are correct; after this point, it is growth. Investors, on the other hand, look to grow their wealth. In doing so, their goal is always growth. Raising money before the product-market fit is achieved will be a misfit between the entrepreneurs’ and investors’ goals. If you have gone to an investor and have received a response that says – show us traction; this misfit of goals between the two parties is more likely a reason.

Doing it this way, does it mean that the goal of gathering funds is delayed in the entrepreneurial journey? Is there an alternate option? Yes, there is always the 3F that you could reach out to – friends, family, and fools. These are the people most likely to invest in you before you have figured out the appropriate business model for your business. Your friends and family trust you and your ability, thus are more patient with you till the business model takes shape.

While you may find some fools who believe in your idea, if you raise funds from gullible individuals, you are more likely to kill the venture due to mismatch.  The conditions for investment posed to you would leave you with no excitement in building the venture anymore.

When considering investments for the venture, watch out for – the right timing to raise money, the right people to raise funds from, and the right means to raise it.

Ask yourself:

Am I making fundraising the primary goal by any chance, or is it still business?

Which is the most likely source to raise investment from at this moment?

Why are they investing in us? Is there a difference in goals? Have you considered the motivation of the individual behind the investment?