Why not to raise, Adam Elgar

Geoff McQueen writes on TechCrunch about how raising too much money can be a problem for a startup. It's a breath of fresh air when, as he mentions, funds raised is often trumpeted as a proxy for success.

All of Geoff's points are good ones but there's one more I'd add, which is to understand whether you can get away without raising at all. Not all businesses are better with VC funding. There are lots of startups and lots of business models behind them. Some are a perfect fit for the VC and the entrepreneur, many get passed on by the VC but in lots of cases, the best way for the leadership team to build value for themselves is to sell their product for more than it cost to make (and repeat).

It used to be that there were huge costs associated with starting a company but this is much less true today, particularly if you don't need a big marketing budget to build a consumer brand.

In these cases, I'd advocate not going for the proxy for success, making lots of other people rich. Keep your head down, go for the real thing.

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A friend was recently telling me about his own first-hand experience of raising money and getting fat. After building his company with a strong culture of bootstrapping and discipline, they were doing well and decided that they’d raise a $10 million round (even though the business was spinning off cash). Within 12 months they’d blown almost half of their round on employee perks and executive recruiters for a failed expansion they then shut down.

http://techcrunch.com/2015/08/09/bigger-isnt-always-better-how-a-big-round-can-hurt-your-startup/

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Why not to raise