In the early stages, it makes sense to get funding once you have assembled your team, have made traction with your product and confirmed a product-market fit. Product-market fit means that you have a viable product that can satisfy a sizeable market. It is when your product has become attractive to your target market that you can actually see and track scalable growth.
In one of my first ecommerce businesses, we sold mobile phones online. Shortly after we launched our site, we knew we had a level of traction and product-market fit after a number of customers, who were not our family and friends, placed orders online and over the phone.
While it’s very difficult to rapidly grow a business without funding, the decision to take on external funding needs to be carefully considered. Before you even get into fundraising mode, the most important question you need to ask yourself is not how much money you need, but who you need to grow your business.
Fundraising usually takes a lot of time and the key is about getting the right investors on board. While it’s tempting to go with the first money offered to you, it’s important that you discern if this investor has your best interests at heart or if their vision and goals are in sync with yours. After all, this investor will be a partner in your business. I’ve previously asked investors about their involvement in other businesses and called founders to get their feedback on specific investors. An overbearing financial partner can dampen the enthusiasm of your team and can kill the very spark that prompted you to launch your project in the first place.
A good team of investors will help your business grow while a bad one can completely destroy the future of your startup. Ideal investors will provide more than just capital, they should help and mentor where required and open their network to your business. Also, an ideal investor should know when to take a back seat and give you and your company the freedom and time to grow your business.
Remember, finding investors is not always about the money but about building the right team who can help you make your company the best that it can possibly be.