Fundraising isn’t the be all and end all

When it comes to launching a startup, one of the biggest decisions an entrepreneur faces is when to fundraise. With the barrage of shows such as The Apprentice and Dragon’s Den, a lot of founders can view fund raising as crucial to success even the definition of success, and most acclerators I’ve seen are focused on investor readiness and pitch decks.

Now I’m not saying that at some stage fund raising isn’t crucial, especially to help hit scale with your startup but putting too much emphasis on fundraising early on can be detrimental. Here are three key reasons why startups should prioritise sales over fundraising:

1. Fundraising Consumes Valuable Time

Fundraising is a time-intensive process and anyone who’s done a fund raise will tell you that. From networking with potential investors, attending meetings, pitching to a final decision can be a full time role for someone and take months. For a startup, time is one of the most precious resources. Every hour spent on fundraising is an hour that could be spent on product development and customer acquisition.

2. Traction and Product Viability Are Essential for Fundraising

At every early stage startup event I’ve been to with investors they all ask for one major thing: traction. What is traction you ask? From the most part it’s sales. Investors are more likely to invest in startups that have a viable product and demonstrated market traction as it reduces their risk.

Without traction, even the most compelling pitch can fall flat and you can be told you’re too early but keep in touch. Realistically, having a solid product and customer base provides proof of concept and reduces the risk for investors. Startups that prioritise building and selling their product can show real-world evidence of demand and the route to scale. This not only makes the startup more attractive to potential investors but also allows founders to negotiate from a position of strength.

3. Use Equity Wisely to Build Your Team

Equity is one of the most powerful tools a startup has and it should be used judiciously. The earlier your startup is the lower your valuation and the more equity you’ll be giving away to get the funding. So maybe there is a different route?

Startups can use equity to bring on the key team members you need in the form of sweat equity. As these folks get the most value from their work by the startup being successful, they will have a real belief in the idea and you as a founder. Now this route also has it’s risks but as a founder you can put provisions in place to help mitigate those. With the right folks around you, you maybe able to get the startup to where you want to be without fund raising at all!!!

Conclusion

I’ve always had a belief that startups should always put more focus on generating sales than fundraising. This approach ensures that when the time comes to seek funding, they have a product with proven market demand and genuine traction. This not only boosts the startup’s valuation but also increases the likelihood of securing investment, if they even need it at that point!