Question

On raising capital its importance

Answer 1

Every day you don’t raise money for your company, there is one more day less likely to find it.  You hear of the statistics: 80% of startups fail, mostly from the lack of capital; out of 10,000 or so business plans read by a VC fund, it only invests in 8.  So the numbers against a start-up are daunting, if you follow the same path of those that fail — inability to identify and secure funding.  Recently, a start-up company told me that it secured a small investment firm to find $1 million, but the investment firm failed to do so after three months. That company lost 3 months in which to secure funding.  Other potential investors assume something is wrong with this company since it still has not raised any funding – almost as if the start-up is already guilty by association. A VC friend once said to me that he asks where did you go before him and if you said 2-3 other VC firms, he immediately suspects that there is something wrong with this start-up. In the real world, there is an actual example. In fact, when someone checks your credit, that is flagged on your credit report.  And if there too many, then the next creditor suspects something is wrong.  Equally true for a start-up company seeking capital.