Enzo Cavalie - Founder of Startupeable introduces the topic “Why raise capital for my startup?” and discusses the reasons why you should or shouldn’t raise capital, as well as the general conditions your startup should meet before seeking an investment round.
How does startup funding work?
Like any other game, the venture capital industry has its own rules. If you don’t follow them, you could spend a great deal of time, effort, and money without understanding how it works.
It’s like going to a casino and getting frustrated when you lose, even though you knew before deciding to play that losing was a possibility.
To make the topic easier to understand, here’s how a venture capital fund’s funnel works when investing in projects that interest it:
- Sourcing - 3,500
- 1st meeting - 1,300
- Pitch - 160
- Term sheet - 40
- Due diligence - 25
- Investment - 5
Conclusion: Only 0.4% of the startups that apply to an investment fund receive funding. This percentage can reach a maximum of 2%, depending on the investor and its thesis.
“If an investor doesn’t see the opportunity, move on.”
Should I raise investment?
It depends. You have 2 options: raise investment or fund yourself (bootstrapping). Here are the advantages of each.
Advantages of raising VC
- You’ll have experienced investors on your team
- Capital to accelerate growth
- Professionalize operations
- Access to new customers
Advantages of bootstrapping
- It will let you focus more on your MVP, strategy, and experiments
- Optimized use of resources
- No dilution
- Freedom to make decisions