Seed Fundraising — When to Raise Money

The timing of your fundraising can have a big impact on the outcome. Here’s how you know if it’s the right time to raise your seed round. Revenue Growth You’ve been growing at 20%/month on revenue (or a comparable metric) for 6 months. Great Situation — Your startup has been growing at 15%/month on revenue (or a comparable metric) for 3 months. Okay Situation — If your company’s revenue numbers (or comparable metrics) are trending down, you should wait to raise. Most investors will focus their attention on growing companies. Bad Situation — Tech Breakthrough You have clear evidence your technology beats existing offerings by an order of magnitude. For example, when Skype launched in 2003, they made expensive international calls free. Great Situation — It appears you have technology that will beat the market but the evidence is limited, e.g. you have an impressive demo but it’s not live with a customer yet. Okay Situation — You have research and prototypes indicating a potential market advantage but you are yet to run your own end-to-end tests. Bad Situation — Potential Revenue You have signed contracts with customers who are already live. The contracts are worth $500k+/year and the payments will start within 60 days. Great Situation — You have live trials with potential customers who are happy with the product. The contracts would be worth $250k+/year but terms are not finalized. Okay Situation — You have no live trials, customers are interested but financial terms have not been discussed. Bad Situation — Team Resumes You have a team with globally recognized skills, applicable to a massive market. E.g. you’re a drone company and the founders recently won the . Great Situation — International Aerial Robotics Competition Your team has academic and/or industry expertise relevant to a big market, with a strong history of performance. For example, you’re building a fintech company after working at Goldman Sachs for a decade. Okay Situation — If your team’s expertise is from an industry different to your startup and you’re not a serial entrepreneur, you should expect to demonstrate traction or a tech breakthrough before being fundable. Bad Situation — Use these guidelines to talk to investors at the best time for your company, not just when they approach you or when you’re tight on money. Good timing can make all the difference. This article is part of a series on Seed Fundraising:1. When to Raise Money 2. How to Build a Deck 3. The Basics of Meetings 4. VCs vs Seed Funds vs Angels 5. How to get a Meeting 6. The 5 Most Common Pitch Mistakes 7. How to get Early Momentum 8. How to Handle an Angel Investor Meeting 9. How to Close the Lead Investor 10. 4 Investor Gotcha Questions 11. 10 Traits of Successful Founders If you’re a B2B company at the seed stage looking for help, you can reach me at ash@ashrust.com. Thanks to Kaego Rust and David Smooke for reading drafts of this.