My Most Common Advice To Clients — “Raise Funds When You Have Traction.”

Start the chess game smartly, with two queens.

Image by Midjourney

TLDR;

• You can ask for an investment at any stage — but there’s a sweet spot.

• It’s healthy for you and the investor.

• Most new entrepreneurs don’t follow this advice.

• (For Paid Subscribers) My preferred document(s) to use in your investment pre and post-traction.

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The Art of Timing Your Fundraising Move

In the game of entrepreneurship, knowing when to seek investment is like starting a chess game. But it’s not always fair. You’d start with a move. However, other entrepreneurs like Adam Neumann, who started their new startup, became a unicorn before they launched. They literally threw the chessboard on the floor and moved on. 

It's about leveraging your position for maximum advantage. Yes, you can reach out for investment at any stage, but there's a golden moment, a sweet spot that's beneficial for both you and the investor. That would give you the chance to play with two queens rather than one.

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The Sweet Spot: Post-Traction Fundraising

This sweet spot emerges when your venture has gained traction. It's the point where your idea is no longer just a concept but a reality that's gaining momentum. This isn't just about improving your bargaining power; it's about establishing a track record that speaks louder than projections and plans.

It’s an entirely different conversation to raise after showcasing results:

• We have a great product.

• We sold to X customers.

These two phrases make the financial model more accurate. They give investors a reason to think it’s a safer investment.

In a nutshell, they prove you have some sort of product-market fit.

The Pitfall Most New Entrepreneurs Miss

Yet, many new entrepreneurs, eager to fuel their dreams, jump the gun on fundraising. They reach out too early when their ideas are untested, and their markets are unproven. This haste often leads to undervalued deals or, worse, a lack of investor interest. 

Many of those clients ask me for advice and feel that raising investment is the solution to test out their products.

The truth is much simpler than that — test your product, and then once it proves its worth, raise investments.

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For Paid Subscribers: My Preferred Investment Document(s) Pre and Post-Traction.

A client asks me, “Which document should I use to ask for an investment right now? A pitch deck? Financial model or business Plan? Everything?”

My answer is simple.