There’s an old saying in the startup world: the best time to raise money is when you don’t need it. Too often, entrepreneurs, being ever optimistic, wait too long before starting the fundraising process. Only, a limited timeline often results in limited funding options, which results in a poor situation for the entrepreneurs. No options, no leverage.
When things are going well with a startup, other investors take note. At Pardot, we had tremendous in-bound interest from investors for a number of reasons. One major reason is that many VC portfolio companies started using Pardot such that it’d come up in board meetings as part of the marketing presentation. When executives shared how much value they received from Pardot, investors took note. And, since we bootstrapped and didn’t need money, investors were even more eager to invest (simpler situation, clean cap table, no baggage).
Another common occurrence is as soon as a startup announces they’ve closed a round, other investors reach out asking if they can put in some money. Clearly, the startup doesn’t need to raise money since they’ve just closed the round, but opportunistically they often take it. Raising money is much easier when things are going well and the money isn’t needed.
The best time to raise money is when you don’t need it.
What else? What are some more thoughts on the idea that the best time to raise money is when you don’t need it?
David Cummings on Startups 