Not all capital needs are best addressed through fundraising. Before beginning your raise, consider if fundraising is the best way to go for your startup. Ask why you need funding. See if you have a specific need for funding that is tied to growing the business.
If you have a business that is on a high growth trajectory, consider venture funding. If the business is not high growth or you have no vision of selling it, consider other forms of funding such as SBA loans or revenue-based funding.
Investors expect a return in the ballpark of five times their investment in five years. Angel and venture capital funding goes to those startups that can provide this level of return. Other factors to consider for venture funding include the following:
- You have a large addressable market.
- You are building a business that is scalable.
- You are using a recurring revenue monetization model.
- You are building a platform-based business rather than a single product.
- You plan to sell the business rather than keep it for a lifestyle business.
- You have built enough of the business to prove product and market validation- the product works, and people will pay for it.