Earlier this week I had the opportunity to talk with an entrepreneur who’s considering raising money. His company is doing well at a small scale and getting close to breakeven. Now, he’s in the process of building financial models and mapping out different scenarios regarding raising money vs growing organically.
Here are a few thoughts on raising money vs growing organically:
- Consider Quantifying the SaaS Valuation Growth Rate Multiplier to get a rough ballpark of the valuation for a competitive fundraising process with investors that understand SaaS and put an emphasis on growth
- Understand that SaaS Value Creation is Back-Loaded and that it’s the high growth rates at scale that create tremendous wealth
- Realize that if SaaS Growth Stalls, the valuation of the business plummets as well
- Analyze the potential outcomes and know that The Value Multiplier to Raise VC Money is 5, that is, the company needs to be five times more value to make the same amount of money personally as not raising money from institutional investors
- Decide on a goal for the business and know that some people shoot for a Billion or Bust
- Evaluate if it’s a Winner Take All Market and the corresponding outcomes
- Finally, think hard about being Rich or Royal as a personal goal
There’s no right or wrong answer when it comes to raising money or growing organically as every situation is different. What’s important is that it’s carefully thought through and that the decision is made intentionally.
What else? What are some more thoughts on raising money vs growing organically?