Recently I’ve been debating with a number of young startup companies that are raising money in the next few months, “what is the right about of capital to raise at a startup?”
It’s a tricky question with no clear answer. There are trade offs. And it obviously depends on the kind of business you’re building. Let me assume for this discussion it’s a garden variety 2010 IT or Internet business (as opposed to something requiring capital equipment or a life sciences project). Any answer will be subjective and any real answer will just be explaining the tradeoffs to you.
On the upper end I’ve spoken openly on many occasions that I think that
raising too much money too quickly can be destructive. It’s like adding
rocket fuel to space ship before you’re sure that it’s pointing in the
right direction for take off (or even if all of the people on board are
qualified to take this into outer space). It places undue pressure
early in the company’s history to “do big things” when sometimes what is
warranted is more prudence. It also takes options off the table if you
eventually find out that this isn’t a VC backable business. I’ve
spoken about this in a post entitled, “Do you even need VC?” to which the answer for most
people is “no.” If you’re interested in that topic the link also has a
short video I did on the topic for Fox Business News.
To read the full, original article click on this link: What is the Right Amount of Money to Raise at a Startup?
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