When Should Your Startup Raise Venture Capital?

 

Venture capital is something that many entrepreneurs consider a necessity when trying to start a business. Before putting together a business plan for your potential investors, there are some things to consider. Like many things in the business world, timing is everything. Here are some things to consider when debating whether to raise venture capital for your startup business.

 

Decide How Quickly to Grow

 

The most important way to tell when you need to raise venture capital is to decide early on how quickly you want to grow. A business that needs to grow quickly will almost always need to raise venture capital in a timely manner. Businesses like these typically rely on the help of investors to get the ball rolling and the investors play an active role from there.

 

Deciding if you're going to grow quickly or take your time will save you (and your potential investors) a lot of trouble in the long run, helping reduce risks. If you decide that your business doesn't need to grow at an accelerated rate, consider holding off on raising venture capital.

 

Get Everything in Order

 

 

Image via Flickr by Tax Credits

 

Your business's financial house needs to be in order before you start looking for funding from venture capitalists. After all, how can you expect to take on the money of an investor if you don't have a system in place to manage it. Make sure you're not spending frivolously or relying on the investors to bail your business out of any financial hardships.

 

You'll want to have a well-rounded team ready to deal with every aspect for your startup's finances. As a general word of advice, if you can't handle what is already in your possession, you won't be able to handle any extra. If you don't have someone to manage the finances responsibly, you shouldn't be asking for anything but some financial advice.

 

Do it Yourself

 

 

Image via Flickr by 401(K) 2013

 

Sometimes it's better to go the road less traveled. Many entrepreneurs will look to investors to get their funding. They'll make up grand business plans and try to find funding with a dazzling presentation, but this doesn't always work out like one would hope. You may be better off trying to make the funding happen yourself.

 

One thing about startups is that there's always going to be risk. The business may be successful but it may have come after years of failed businesses. It can feel like nine times out of 10, the business may fail and the entrepreneur needs to move on to the next big idea.

 

Raising capital on a venture you aren't certain about can backfire. It takes the control out of your hands and gives the power to the investor. This means that when you're ready to pull the plug, you may not be able to because your investor may not see the risk as well as you do. By keeping control of the funding from the beginning, you can keep control of the business knowing that when you need to pull the plug, you can.

 

Wait a While

 

 

Image via Flickr by pbalcer

 

Perhaps the most important tip when raising venture capital is to take your time. While most people will be excited about the prospects raised by your new business idea, it doesn't mean that it's something that has potential worthy of the risky capital investments. Money talks, so what most people won't be willing to tell you is that just because the opportunity to invest is there, it doesn't mean it is in the best interest of everyone involved. It also might be worth considering taking online classes to study on taxation for business. You never know how much money you could be saving in the long run by knowing all of the laws and legalities behind VC.

 

The best time to start raising venture capital is going to be different for each business. As long as you seek the advice and instruction of the experts and take your time, you can help your business flourish.

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