Startup fundraising isn’t for everyone. You probably already know that. To fundraise is to sacrifice some ownership and to add stress from investors. Here, however, we want to show you some situations where it is BETTER TO FUNDRAISE.
Fundraising almost feels like the way to achieve fame as a startup. It is a startup’s way to get in the flashy news. This drives humble and rational founders to shy away from fundraising when it doesn’t seem like a necessity. If you feel this way, use these situations as a sign to reconsider fundraising.
Four Situations Where you Should Consider Fundraising
Situation #1: Too much work, no cash for hiring
When the amount of work is unbearable on the team, you should seek fundraising to afford new hires. It doesn’t matter which stage the startup is at. If developing the MVP takes significant work, you should fundraise before building the MVP.
Situation #2: Huge, sustainable customer demand
No matter what industry you’re in, having a strong demand makes you incredibly attractive to investors. The definition of a strong demand varies across industries. In general, demand must be huge and sustainable over a relatively long period.
Demand alone is not a calling for fundraising. Yes, everybody would want to join forces with you, but there must be a clear plan to use the funding. The cash could be needed to deliver the services, expand, and or endure competition. When you have a strong demand, you must consider how extra funding could drive significant growth.
Situation #3: Competitors are significantly richer
In case your direct competitors seem to have more resources, you should consider fundraising to keep up.
Extra cash at the hand of competitors could be used against your startup in the form of heavy marketing campaigns, price wars, or acquiring talents.
Examine what your competitors are doing with their resources and build a funded plan to survive in the market.
Situation #4: The company is falling behind
If the company is not achieving its full potential, it’s time to pause and examine the reasons. If you have been running in a lean form all along, consider how funding could change things up. Would extra cash enhance and drive growth? If yes, you must fundraise.