The Entrepreneur Insiders network is an online community where the most thoughtful and influential people in America’s startup scene contribute answers to timely questions about entrepreneurship and careers. Today’s answer to the question “When is the best time to look for investors?” Is written by Simon Berg, CEO of Ceros.
As an entrepreneur, you should always be looking for investors. You’ve heard the ABC (always be closing) acronym in sales; when running a business, it’s your job to ABLM (always be looking for money).
The truth is, choosing an investor is much like choosing a life partner. It’s much better to start the process before you’re feeling desperate. Building a real relationship over time will ensure that yours isn’t just a fleeting romance that dissolves when things get tough. When you and a VC know one another as people, it’s much easier to start a conversation about funding than it is with a stranger.
Once you’ve developed relationships with a few VCs, the next task is to figure out at what point to start having conversations about funding. Timing depends on a number of factors, including:
- What stage your company is at
- How quickly you’re growing
- What the overall market is doing
- How aggressively you want to scale
- How your specific industry is performing
- What your cash flow looks like
When it comes down to it, you’ll want to start conversations earlier than you think you’ll need to. I’ve learned the hard way that waiting until you need money can cause undue stress for you and your executives. That said, you also need to feel confident in your organization’s performance and story. Until you do, you’re going to have a very hard time selling your vision to VCs.
See also: The Best Time to Look for Investors
If you’re in the small category of startups like Uber that are experiencing astronomical growth, I don’t have much practical advice to share with you. You’re in a unique position of having investors throwing money at you. But assuming you’re not a founder at a unicorn and your business is still growing reasonably fast, there are a few tips that can help you during the fundraising process:
Don’t be scared
Pitching to investors can be daunting, especially for new founders. But I’m here to tell you to put your fears aside. Most VCs are not as smart as you think they are—they’re as smart as you—not in a category of genius beyond your reach. At the end of the day, we’re all just humans, playing a strange sort of game together. Funding your dream is a noble cause, but it’s important not to take the process too seriously.
Be honest
Always be honest with potential investors. If you have issues or problems within your organization, own them. There’s no point in hiding your shortcomings during fundraising conversations. If investors end up giving you money, they’ll confront your challenges eventually. Better to tell them early on than have skeletons rattling around in the closet.
Embrace the process
Accept these certain inalienable truths about fundraising:
- You will have lots and lots and lots of meetings. It will get exhausting. You’ll need to find a way to stay energized until the very end.
- You are going to get a lot of very polite no’s, but no’s nonetheless. Don’t take them personally.
- The process will take longer than you anticipate. This is normal.
- Not everyone will believe in your vision or idea. That’s actually a good thing. If some investors don’t think you’re crazy, you’re probably doing something wrong.
Remember: You’re choosing an investor as much as he or she is choosing you. For me, fundraising is as much about finding the people you want to work with as it is about the amount of money they’ll give you and what valuation they give to your business. Start building your relationships now, and begin fundraising talks earlier than you think you’ll need to.
