Things to keep in mind before raising funds

Why raise funding for your idea?

Startups need funding to build their product, market their services, hire resources and meeting other operational expenses.

While as glamorous as it may sound, fundraising is a full-time job so before you decide to embark on this journey, you must know what and why you're getting into. Most entrepreneurs jump into the process without having a clear rationale for it (I've done it on a couple of occasions myself!).

They end up wasting their time and feel demotivated after a grueling process. Not to mention the risk of derailing a startup from its track due to lack of focus on core activities.

My default advice is, unless you've achieved product-market fit try to avoid raising any funds. Also, if you're running a profitable business why bother chasing investors? But this is not always true ー there are times when raising money is necessary.

Meet development expenses

If you're running a startup that is building products requiring significant R&D effort (e.g. hardware) to bring it to market, you might need capital just to get the MVP out.

Expand the business

You can always reinvest profits to grow gradually but if you're looking to expand the business aggressively to increase market share or meet consumer demand, you might benefit from a capital injection.

Survive till profitability

Generally I advice startups to aim from ramen profitability from day 1 but sometimes it's not possible especially in the case of consumer/B2C startups. In most cases such startups raise capital to cover their expenses till they start monetizing from users.

Thwart competition

If you're operating in a winner-takes-all market where network effects mean everything, you can gain serious edge over other competitors in the space if you can keep improving your product and grow faster than others.

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