Before You Raise Money, Wait Until Your Startup Is Profitable

A while back, we had shared an article bursting the myth that one doesn't needs an investor in order to declare his or her startup a success. Today, we take the dialogue forward from there and will try to enlighten you about the right time to raise money for your startup, if at all you consider it's important to do so.

Consider that you have an awesome idea in place and have successfully transformed that idea into action by starting your own company. Now, instead of scouting for investors right away in your childhood phase, you wait until your startup is already profitable. Yes, you read it right. The idea might seem crazy at first that why would you need to raise money if you're already profitable, Well, let me explain that to you.

  1. When you're profitable, your startup will raise money at a much higher valuation than it would have in its initial stages. - The logic behind this is very simple. When you have proven and successful concept, idea in the market, the investors aren't taking that much a huge risk as they take in investing in an early stage startup. You have already proved the potential of your startup and know how much your gem of a idea is worth. Further, you have already proved that you're not just a good orator but an equally good businessman with good business acumen.

  2. You won't have to give up that much control - You can still remain the king of your kingdom and negotiate terms and conditions for the deal as this is not something that your startup is in a desperate need of. This time, you're not the one in a lower position begging for investing and have the liberty to accept or reject the offer if you don't find it suitable according to your startup's potential. As your company is a proven success, it puts you in a stronger bargaining position providing you with various opportunities like monitoring the number of board seats in your company etc.

  3. Provides you with buffer for future expansion - Life is living in the moment , certainly, it is, but when it comes to business, having a future plan in place is always preferable. When in initial stages, startups have a tendency to overspend on certain aspects like testing certain products or services etc. But now that your business is already established, you can think about your startup's future and plan accordingly. With your business already established, you can use the investor's money in expanding the business. It can be a new product/ service or a new location. You will have the money and time to think about it all.

I hope the above points cleared your initial doubts about our advice and you will consider it for your future endeavors.

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