Last week I published some thoughts on the mindset of raising money and today I’m going to go over the nuances of raising money for your startup.

If this already intrigues you then go ahead and check out this post I wrote: “19 Places To Find Investor Money For Veterans”

Why Raise Money for a Startup

First rule: Don’t raise money just to say you raised money.

Second rule: Never forget the First Rule.

The moment you tell someone you have a startup, two questions tend to follow:

1. “Cool! What is it?”

2. “So do you have venture capital???”

To non-entrepreneurs, they think every startup has to have funding. They see the headlines and see hundreds of millions of dollars invested and think, “This is how ALL great companies are started.” To you, the founder, this can be deceiving.

Measuring your worth as a founder or even as a startup by how much money you raised is a very limited way to measure the value you have created.

Case in point: Uber raised $25 billion and has yet to be consistently profitable. And they are just one of a handful of billion-dollar companies that are not yet profitable.

Being wined and dined by Venture Capitalists sounds great, but building a great company will be even better over the long run. So why try and raise money?

To start, you may need it.

You may need a prototype product built or need money to cover the first production run or your ability to make something with no-code tools runs out and you need to hire a professional development team. Or the business is at a point where to grow and you need to go full-time in it, but you cannot get by without a salary.

That’s where investors can come in.

Outside money can cover things like:

• Salaries

• Rent/lease of office and/or equipment

• Advertising

• Research and Development

Investor money can also do something really important: buy TIME.

I’m going to make a strong argument for bootstrapping, or NOT raising money, and why you should prioritize paying customers, but there is a case for time.

What do I mean? Investor money can help you go faster.

You may be able to get by without the outside money, but it will be a tough slog. Maybe you just want to go for a quick exit and you want to get there as soon as possible. In that case, you want to grow quickly, and to do that you may need outside money.

Finding the Right Investors

Money is not all equal.

Some money will come with investors you do not want to deal with. The wrong investor can distract you with their ability to write a check while getting in your way as you try and build the business, ultimately causing more harm than good.

You also get to choose who you make rich.

Are they a jerk? Don’t take their money.

Do you hate being around them? Don’t take their money.

Do they have a totally different set of values than you? Maybe don’t take their money.

The point is that you are taking their money to grow a business with the intent of making everyone involved rich. If you don’t like them…why make them rich?

The BEST Way to Raise Money

Raising money from investors is cool, but you know what is even cooler?

Making money.

Check out this list of successful companies that started with little or no money.

The best way you can raise money for your startup is to do something that creates value and get customers. Your best investors are people who are willing to pay for your product and service. It may not always be possible to grow a business like this, but this is the best-case scenario.

By avoiding taking money from investors, you also get to keep more of the business. Yes, that matters because of the equity and money, but it also matters when it comes to decisions regarding how the business operates.

Quick war story:

I worked with a founder that was talking to an angel investor about investing in the company. Who was this investor? He was a surgeon who had a boatload of money and knew nothing about this field. I advised the founder to NOT take this guy’s money. Yes- he could write a check. That was helpful. But after that, he did not have much of anything to add to the company. He was a surgeon, not a tech guru. 

Whatever you do, be deliberate.

Just because you have a startup does not mean that you need to go out and raise money. The ego and confidence from that are short-lived.

Don’t forget the most important step: you have to go and BUILD.