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What our members have to say...
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"If someone who works fully online in India has a bright idea, how can he advertise his plan to global investors? It is right here at the Investment Network. This is a magnificent platform for connecting a simple man with a brilliant idea to a man with a lot of wealth for an exciting business prospect. I took the step, registered in September 2010 as an entrepreneur, got 11 investor contacts within 6 weeks, and have finally closed a $150,000 business deal with a CEO of a giant multinational. Those who wonder if the website is real or not, I can only say, take the step, get yourself registered and pay the fees, and probably at the end of a few months, you will perhaps shout in happiness just like me that, " This website is real, but the results are unreal". Brilliant platform!"
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Tanmay Misra - Forex Trader |
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Startup Funds: How Much To Raise
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I spent some time yesterday talking to an entrepreneur about this topic and I thought I'd share what I told him with everyone.
When your company is growing really fast, doubling employees year over year, adding users and customers at a very rapid rate, you don't want to raise too much money. If you raise three or four years of cash, there is a very good chance that by your second year, you will be sitting on cash that you raised when your company was worth considerably less. That's not a good thing. It's too dilutive to you and your co-founders and angels.
I've got two basic rules of thumb. First, try to dilute in the 10-20% band whenever you raise money. If you can keep it to 10%, that is great. You might have to do more, but try hard to keep your dilution below 20% each round. If you do two or three rounds at north of 20% each round, you'll end up with too little of the company.
Second, raise 12-18 months of cash each time you raise money. Less than a year is too little. You'll be raising money again before you know it. Longer than 18 months means you may well be sitting on cash that you raised when your company was worth a lot less.
These rules are most applicable in the early stages. When your company gets above 100 employees and valued at north of $50mm, things change. You may need to have more cash on your balance sheet for working capital reasons and you may not be increasing value at quite the same rate as you were when you were smaller. You might want to raise 24 months of cash or more at that stage.
But for the seed, Series A, and Series B rounds, I think 10-20% dilution and 12-18 months of cash are ideal. It's what I advise our portfolio companies to do and it is what I advise other entrepreneurs to do.
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