Startup Secret No. 15: Early money

Should you wait until you have customers and revenues before raising funds? Not necessarily.

"Don't be afraid of raising money."

--Chris Reid, co-founder of Sortable

One piece of advice I hear frequently from entrepreneurs is this: "Don't take money before you need to." Especially if your company is pre-revenue, taking money early means that investors will be placing big bets on you, and they often compensate for that by insisting on onerous terms. You could be left owning very little of the company you're founding.

But Chris Reid of Sortable has a different opinion. "Don't worry about raising early," he told me after I interviewed him about his third startup . "Having smart money in early is not a bad thing. You can accelerate things a lot with money."

The tradeoff--dilution of your ownership--can be worth it. It's better to have 10 percent of a big thing than 100 percent of nothing.


Startup Secrets is based on personal interviews with people building companies and from their blog posts and news stories. Subscribe to Startup Secrets on Twitter or come back to Rafe's Radar every day for a new one. See all the Startup Secrets.

 

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