Signs That Your Startup Needs Venture Capital
We have written before about what to look for in a capital partner. But that’s not the first question founders should be asking. Before you seek out a capital partner – especially one like a venture capitalist who can provide a quick and substantial investment but with lots of strings attached – it’s important to ask whether you need one at all. Answers will vary, and they won’t always be obvious. Either way, every startup needs to figure out a funding strategy in the earliest days to start building momentum in the form of money. With that in mind, here are some clear signs your startup needs venture capital:
You Require Scale to Succeed
Some business models only make sense once a company reaches a certain size. Uber and Airbnb are two good examples. Before they became giants in their respective industries, these companies hemorrhaged cash to keep ahead of competitors and capture market share as fast as possible. Companies that need to scale quickly are prime candidates for venture capital because they gain access to an abundant and potentially ongoing funding source. The startups with the best chance to scale are also the most attractive for venture investors – they’re natural partners.
Your Opportunity Has an Expiration Date
The window of opportunity is short for some startups, especially in highly competitive industries. Getting crowded out of the market is a real risk, even for startups with bright ideas. How fast a startup moves depends on how much money it has. Venture capital works like rocket fuel by offering months or years of cash to burn all at once.
You Need an Experienced Navigator
More than just a source of funding, venture capitalists provide guidance and oversight, in various degrees, to the startups they support. For founders who have more ambition than experience, or have bold but uncertain plans for growth, getting ideas and insights from venture capitalists can be invaluable. They know from experience what it takes to make a startup into a viable company.
You Aren’t Built for Bootstrapping
Trying to bootstrap a startup can lead to cash flow issues or limit growth potential, among plenty of other problems. Some startups aren’t equipped to finance their own growth while others can’t wait that long. If bootstrapping doesn’t make sense for whatever reason, venture capital may be the best or only alternative.
Do You Need Venture Capital?
It can take months to secure venture capital. It’s also possible to come up empty handed. If your startup plans to court bankers, you need to start now and work smart.
Proseer advises startups about the next move and the next ten moves. We can help you build and execute a funding strategy whether or not that includes venture capital. What’s the best path forward? Contact us to explore the answer.
