The How To Build A Business series is coming to an end, but not without diving into everyone’s favorite topic, money. Fundraising is an art, it takes a tremendous amount of skill, effort and most importantly time. As your startup gets going sooner or later the need for fundraising will arise and we want you to be ready for that moment because it often means life or death for your idea.
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Why do you need more capital?
This is an important question you and your team need to ask yourself before you go out on the fundraising trail. First, it serves as a great exercise to figure out exactly what your current burn rate is. Once you establish this number, you know exactly how much time is left before you run out of money. It also allows you to budget out your future development plan. These 2 factors together determine if your business needs to fundraise and ultimately how much money is needed.
Where can you find the money?
When we interviewed Mike Smerklo of Next Coast Ventures, he laid his opinion on how startups should look for money. Start first with friends and family, this is a great test for your idea because if you can't raise money from 4-5 of the people who “love” you; you might need to reevaluate the business. Next, search through your network. You would be surprised who you have met over the years. Your last step in this process is securing funding from venture capital, but that's an episode in its own right.
Our advice once you get the money.
This is something that is really simple, but it’s so important in our opinion. Be responsible, you are using other people's money. They put their faith in you, and do the right thing. Use the money how you said you were going to, you do not want to burn any bridges because you will always need more money.
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