DO YOU NEED $1,000,000? 7 Questions To Ask Yourself Before You Fundraise

girl with million dollars

Photo: By Steve Rhodes on flickr

Jason Baptiste, co-founder of iPad ad network and content platform OnSwipe, has raised $6 million for his startup.There’s a lot he wishes he knew before founding a company — so he wrote a book about it.

Baptiste’s book, The Ultralight Startup: Launching a Business Without any Clout or Capital, uses case studies from OnSwipe, Twitter, Foursquare, and Dropbox to provide a how-to guide for entrepreneurs. 

We got our hands on the first chapter, From $1,000 to $1,000,000, and pulled out Baptiste’s tips on when entrepreneurs should fundraise.

Here are 7 questions to ask yourself before raising a round >
 

Want the book? You can download the entire thing for free for the next 24 hours on your iPad. After that, buy it on Amazon, here.

1. Do you have a technical cofounder?

If you have a technical cofounder or someone who is focused on product, you are far more likely to raise money.

Product drives the growth of a company; having a product-driven founder can generate growth.

2. Do you have a demo?

If you have a working demo, then you are much more likely to raise money since you can show an investor what your company does.

Onswipe was able to fund-raise because we could show investors first- hand exactly what we do. Show, don't tell.

3. Do you have any customers?

Companies with customers are more likely to raise venture capital than those without. If you don't have customers yet, you should make this a priority, as it shows proof of traction in the market. It's not about the amount of traction, but the proof it shows in your model.

4. Are you ready to bring more people on board?

You need to be ready to manage other people and expand your team. If you are not ready for this, then you are not ready to raise venture capital. Venture capital lets you do one thing in the beginning: Hire more manpower.

5. Have you rid yourself of other obligations?

If you are not 100 per cent committed to your startup you should hold off on raising money. Many entrepreneurs try to fund- raise while still at their current job. Though it's good to begin a startup before you quit your job, it takes a whole lot more time and effort to raise money.

6. Is your business large enough?

Most companies are not large enough to be backed by venture capital. To raise venture capital, companies should be in multibillion- dollar markets or have the potential to make revenues of more than one hundred million dollars a year.

7. Are you able to devote the majority of your time to fundraising?

Fundraising is a time-consuming process that will completely slow down all other fast-moving aspects of your company. Be prepared to put business development, product development, and any marketing you may be doing on hold, or at least slow them down for a while.

Put together a strategy for keeping operations going while fundraising. I suggest spending 50 per cent of your time on fundraising and 50 per cent on continued operations and product development. One founder should still be moving product development forward.

Want to buy Jason's book? You can download the entire thing for free for the next 24 hours on your iPad. After that, buy it on Amazon, here.

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