Even a pandemic couldnt discourage entrepreneurs from seeking capital to fund their dreams.
Entrepreneurs should be able to seek the money they need to ensure the success of their business.
However, many of them have trouble deciding whether itd be a good idea in the first place… You should know precisely what you are in for before you step into the fundraising process.
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Instead, I recommend the following simple and practical framework to figure out whats right for you.
If you chose the first option, the answer is simpleyou probably wont need venture capital investments.
You already have enough time and patience to take the company to your target profit/valuation with available resources.
Who knows, you may just be able to make it right around time for your retirement!
If thats your case, youll need funding to propel your business to success.
If you want to be financially independent within 5-10 years, you will most likely need venture capital investment.
That couldve been you!
It is essential to know the answers to all of these questions to understand the opportunities available to you.
Profitability or breaking even
Dont worry about either of these things just yet.
The fact of the matter is that profits can be the enemy of success for a startup.
This mentality can cause startups to lose the growth rate momentum and market share.
Founders often think that getting to the break-even point validates their business model.
Aiming for profitability makes you complacent and less willing to take a risk.
Why does this happen?
Lets start with the basics.
A startup is a team of like-minded people who are after maximum capitalization (CAPITALIZATION, not profit).
Consequently, any delay in this path jeopardizes the existence of the startup as a whole.
Only an inexperienced investor will bug you with the question, So, when is break-even?
Its very rare, but there are exceptions to this rule.
But I have hardly seen this happen.
Also, look into alternate ways of raising money, such as debt financing or crowdfunding.
Finally, encourage your team to set goals that can help minimize risk and evaluate reward potentials.
And use this guide for the practical insights it offers about ways to improve your business and financial standing.
Partner at pre-seed fund WannaBiz, angel investor.
Mentor at 500 Startups, advisor.
Named one of the Forbes 30 Under 30 in Ukraine.
