Why can't I raise money?
|Adam Draper||Aug 2, 2019|
So many founders talk about this, I always get asked by our portfolio or other founder: Should I raise a round? Is X technology exciting to investors yet? Why can’t I raise? (Some thoughts exaggerated, but not much)
“Jimmy, I’ve been a scout for a long time, and the number one rule is, arms slow down when they get old. Now, if I call the office and tell ‘em I got a guy here almost twice these kids’ age, I’m gonna get laughed at. But, if I don’t call in a 98-mile-an-hour fastball, I’m gonna get fired!”
- The movie “The Rookie”, starring Dennis Quaid
Without going into too much context on what this movie is about, whether it’s baseball, or starting a company. Good is good. At the end of the day, an investor is looking for great people executing on a mission consistently.
There are a few ways I see people fundraise at the earliest stages:
Friends and Family (The “give me a shot round”)
Angels (The “I need money to learn what I’m doing wrong” round)
Accelerator (The “community of people may be able to help me figure this out”, round)
Bridge (“I ran out of money and need to go back to my previous investors, or just need a little more speed to make it work,” round)
Seed (“For some reason this is $2m now”, round)
What none of these is showing is that in order to jump from Friends and Family to Seed, you have to show progress. In the market, there are general touchstones the market looks for. Progress is all about solving a problem for people in a large enough market to support a business.
Consumer company: Hit 10% growth WoW for 1 year
Enterprise company: Hit 10% revenue growth MoM for 1 year
So my answer to “Should I raise.” or “Why can’t I raise.” at any of these stages:
WHY DO YOU NEED MONEY?
ARE YOU PITCHING A 98 MPH FASTBALL?
By Adam Draper
I ponder as a VC.
It's a quick one minute read to make you think, smile, or laugh.
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