Do More Faster India, 2nd Edition

Theme Five: Fundraising

Most companies come to Techstars with a goal of raising money. One of the first things we do is make them take a step back and ask themselves, “Do I need to raise money?” We’re quite emphatic that the answer can be “No,” and that often the best answer is “No.” Many great entrepreneurs are bootstrappers to the core, and huge companies have been created with little or no outside investment. In every Techstars class to date, there has been at least one company that bootstrapped its way to success, such as J-Squared in 2007 and Occipital in 2008.

Of course, reality often knocks loudly. The vast majority of the startups that we work with will not be able to achieve profitability—or even positive cash flow—quickly enough to avoid death. So, they have to look to investors—both angels and venture capitalists—to help them get their businesses up and running.

Entrepreneurs often fail to recognize that whether to raise funds is one of the most important decisions of an early-stage startup. When raising money from outside investors, there are always trade-offs. Before you raise money, the company is unambiguously your business. You create the business plan, you hire the people you want, you make all the decisions, you set the culture, and you decide what to share with others. After you raise money, regardless of the amount, you now have new partners in your business. Investment usually comes with some level of board control and an expectation of larger returns. ...