The complexity of funding has derailed more startups than just about anything else. This is a topic that deserves a lot more attention than an FD post, but here's a perspective to consider.
The challenge to founders is not about:
- The Idea
- The Product
- The Market
- The MVP
- Burn rates
- Hiring the right people
- Forming the right partnerships
It's about ALL of the above and so much more.
This becomes particularly challenging because most founders (and founding teams) have one (or a few) items from the list that they prefer (usually the product) and at least one item that they avoid at all costs (usually developing the funding and investing model). This is were a good business coach can add a lot of value.
For purposes of this post, let's focus on the funding and investing model. The founding team is responsible for knowing what resources (including but not limited to money) will be required to launch the business. In addition they are responsible for developing and executing the plan for obtaining, tracking, and responsibly using those resources.
Hoping for the best, being overly optimistic, courting "C" round investors, and all of the things that founders often do to feel better about themselves, their companies, and their decisions are ways to avoid doing the difficult and imperative work.
Let's be clear THIS IS HARD. Very few people--especially people with a creative vision--enjoy going "hat in hand" and asking for money. No one looks forward to watching equity slip away, no matter how much they think the company will be worth in the future. The battles over money, control, vesting, and all the other crap are both real (they happen) and meaningless (they ultimately don't matter).
It seems that you have learned that you should have thought about this earlier ... almost every founder should (even the experienced ones). The good news is that it seems like you have some runway and are paying attention now.
A few questions to consider:
- How much money will you need?
- When will you need it?
- Where will it come from? (it doesn't matter what you call your funding round - can you get the right investors at the right time?)
- Who will provide it when you need it before "traditional" investors are ready to invest?
- What can you do to have the right investors in place at the right time?
Here is the bottom line: If you're not ready for a "seed round" and you need money, you have three choices:
- Figure out some way to get what you need without spending money.
- Find someone other than a "seed" investor to bridge the financial gap.
- Stop spending money now, because you won't be able to launch and the money you are spending now will be wasted.
Does that help?