Funding Your Business: Make It or Raise It?
Every startup founder constantly has money on their mind. Do we have enough? Do I need to raise more? How far can I take my business with this amount?
Funding is a main priority for anyone who starts and/or runs a company. Success is often dependent, if not measured, by the startup amount of funding you bring to the table. Many times, you are treated like a failure if your investment isn’t big enough, even if you are indeed already making – or poised to make – a profit.
For example, startups with smaller investment are unfortunately, favored less when compared to larger-scale startups that raise or have raised millions. It’s almost a “chicken or the egg” concept… Startups with larger initial investment are often able to attract larger investors moving forward. Thus, they move forward quicker. While, on the other hand, their lower-funded counterparts remain stagnant, fail, or even never get off the ground.
Still, startups vary on a large spectrum with different founders and paths when it comes to funding and success. Yet, the one thing every startup has in common, is the amount of effort required to raise money and/or make enough money that will sustain and grow the business.
In the beginning days of a startup, money and finding customers is the primary focus. It’s just important to consider which one will you – or should you – do first? Can you choose? Can you do them simultaneously?
This is important to consider since further growth will either come from additional investment to scale the business OR increasing revenues to further expand. It’s often difficult for entrepreneurs to know whether to commit more time and effort to making money OR raising money. Rarely, can a startup do both.
The bottom line is that if you commit 100% to either one or the other, you will most likely still succeed. Specifically, because being the leader of a business also comes with other factors to consider and tame, such as market speed and/or other external threats. Thus, to succeed, you need to not only focus on making and raising money, but how to time your choice to produce the most positive effects on and in your business.
Things to Know About Making vs Raising Funding for Your Business
- Making or Raising Money is a Full-Time commitment
It takes a lot of time and commitment to raise money. You’ll have to invest your time into setting up meetings, preparing, attending the meetings, and follow-ups. As a founder, you must understand you cannot run a business “on the side” while focusing on other tasks. It takes your full, undivided, attention. The appropriate metric for measuring a startup’s success is time. How fast can you raise “X” amount of money, close a round, and get back to making money? This is exactly why you must commit to one or the other, making or raising.
- Raising Money Does Not Always Mean You Have a Business
Even if you can convince a couple of investors to invest in your company, it still doesn’t always mean you have an actual “business.” It more or less merely means you have the potential to reach many more customers in the future. Although, investors can’t always be a prime example of how an actual customer might respond to what your company is offering. Is it key to not let the factor of money (the presence or lack) prevent you from finding the right marketing technique to build an actual business for actual customers. In today’s business world, it is important to have recurring revenue to take your business to the next level. The market is extremely competitive, focusing on speed and scale.
- Know the Difference Between Scalable and Having Customers
Businesses can increase their likelihood of remaining profitable by keeping startup costs low. Startups can start off profitable, but soon fail because their customer base was never expanded. To ensure that your customer base and the growth of it is stable enough to remain profitable, there needs to be a business model and plan in place to that will allow your business to scale appropriately. The bottom line is that you should always be seeking repeatable business that can add to new business to sustain growth over time. In other words, growth can only be generated and maintained through strategically pushing the limits of your business, questioning the repeatability and scalability, and ensuring your efforts are adequately funded – either through making or raising – throughout the process.