Entrepreneurs love talking about raising money. Now, I say “talking” because the reality is that most won’t raise any money. Many will try but few will succeed, and that’s OK. Now, so much of the fundraising process is driven by traction — real customer data — and not by big ideas (every idea can already be found with a Google search).
For entrepreneurs that are in a position to raise money (read: good metrics), here are seven things to consider before raising institutional money:
- Once the first round is raised, expect to be on the fundraising treadmill every 12-24 months forever
- Know that an exit of $300 million or greater is often needed for everyone to get a big helping
- Make the explicit decision to be rich or king
- Unlike a spouse, investors can never be divorced from the business
- Remember that for every 1,000 venture-backed startups, less than 20 sell for $100 million or more
- Do the math and prove to yourself that the company has to be 5x more valuable for it to make sense to raise money
- Ensure that it’s truly a 10x better business model
Raising institutional money isn’t for most entrepreneurs but is absolutely right for the tiny percentage that can put it to work and build a huge company. The next time an entrepreneur says they want to raise institutional money, make sure they evaluate these seven things.
What else? What are some more things to consider before raising institutional money?