Missing the Startup Capital Window

Imagine this scenario. You have a brilliant idea. Media company like Business Insider have named your idea a million dollar idea. You have built your product so well that people from across the globe, let’s say in 45 different countries, have signed up for your service. Investors are calling you directly to see if you are ready to raise a round of startup capital. Large social media networks are sniffing around showing interest in your business.

Then you close it all down.

Sound crazy? It was. I lived it through my first startup. In fact, I wrote about the whole thing.

It takes time to raise startup capital.

In most startups there is a timeframe when raising startup capital makes the most sense. If you miss that window you might be out of luck. Raise startup capital too early and you risk getting a low valuation. Wait too long to raise capital and you risk having lost all of your momentum.

Most people that are familiar with the startup industry agree that startup fundraising typically takes about three to nine months long. To pull it off in a shorter amount of time is rare and something that is often reserved for only the most experienced of startup founders who have a history of successful exits.

That timeframe is something you should keep in mind as a startup founder. Particularly if you are already in business and anticipate needing to raise another round of funding. You don’t want to wait too long to start the process and risk running out of cash.

There is even a right and wrong time of the year to raise startup capital.

Just because angel investors and venture capitalists were often entrepreneurs and startup founders themselves doesn’t mean that they don’t follow normal professional schedules when it comes to vacations. Especially if they have children who are of school age. It isn’t uncommon for venture capital firms to slow down the pace of their investing during certain times of the year. Data does show that investments in startups slow ahead of the winter holiday season in the United States and prior to the start of summer vacations.

This is something you should plan for as a startup founder that is raising startup capital. If you are close to closing a deal you may not want to give those investors a long time to think about things over a vacation.

Then there is the case of bootstrapping too long and missing your startup capital window all together.

Which is exactly what I did with my first startup. Because we were seeing so much traction I elected to hold off on accepting investor money. Following the advice I now give other startup founders, I was actively engaging with investors even though I didn’t have immediate plans to take a round. But by waiting too long I missed our window. Once I wasn’t able to personally fund our growth any longer and we struggled to show revenue growth those interested investors disappeared.

I see this with some of the entrepreneurs I work with. I have even seen cases where a business is five to seven years old and they come to me looking to raise capital. It isn’t impossible, but by then raising a round is pretty improbable. Especially if the growth of the business has stagnated. Most of the investors I know are highly skeptical of a mature business that is looking to raise its very first round of investor funding.

If you have ever tried jumping off of a swing set then you know how critical getting the timing right can be. If you wait too long to jump off you will be high enough that you can hurt yourself landing. If you jump too early you don’t get enough height and ruin the experience or even catch your feet and twist an ankle.

There is a right and a wrong time to raise money for your idea. If you don’t know when that is talk to other startup founders who have done it successfully. Talk to investors and ask for examples of startups they have invested in that have pulled the trigger at the right time. The good news is that this trail has been blazed many times before and you can learn from those examples.

I’m a former C-level banking exec. and 3x startup founder leading a corporate innovation/product team and have helped companies raise over $500M in funding.