Part 1 of 2-part series
I started Dasheroo, my free business dashboards startup, just over a year ago. Between my wife and I, that would make Dasheroo our third startup, and we pinky-swore that it would be the last.
Don’t get me wrong, we both love the startup life, but after three we may just need a long break.
The first two startups were pure bootstrapped, "friends and family" type deals. Very small raises of funds which enabled us to retain most of the equity in the company, but the tradeoff was at the expense of faster growth and ultimately higher value.
So, at Dasheroo, we were once again faced with the "bootstrap it or raise a venture capital round?" question.
Every entrepreneur goes through this dilemma—have a smaller equity chunk of a potentially bigger pie by taking outside money, or keep more of that pie for yourself (even though the pie may be smaller) by going the DIY approach. It’s both a personal and professional decision, which cannot be taken lightly.
Related Article: Getting By Without a Business Loan
Spoiler alert: I finally decided to raise a $3.25MM round of funding ($2.5 of it from VC’s), but not before much soul searching and discussion about the business opportunity and window of opportunity. Here’s some tips to help with your fundraising process:
If you need to keep your ‘day job’ while you get NewCo off the ground, do it. Nights, weekends, that’s what you’re signing up for. It’ll force you to squeeze every last bit of value out of each dollar you spend. It also allows you to prove out your concept before taking on the obligation of investors or, it may convince you that you don’t need any! Either way, it allows you to get some real-life learnings prior to making your decision.
Put Skin in the Game
Well, if you abide by tip #1 above, you already do have skin in the game! But that said, when we did raise our initial round of funding each of the co-founders (and their parents) all invested alongside our VC. Talk about pressure, you don’t want any stress at that next family gathering.
Related Article: 4 Little Known Sources of Startup Capital
Know the Size of Your Addressable Market
The bigger the size, and the bigger the window of opportunity to quickly capture that market, the more you should consider raising a VC round. You’ll need capital to help execute. At Dasheroo, I say almost every day that “every business in the world needs a business dashboard.”
With a business freemium model I’m confident most of those global businesses will choose Dasheroo, so, the size of our addressable market is big. We also think we have a unique and powerful way to acquire them because ‘big data’ is a hot and growing area. With venture capital behind us we should be able to pounce on that opportunity much more quickly than otherwise.
Make Sure You Need Money (and Really Want It)
An old adage says "take money when you don’t need it," meaning that if you wait too long, you might not get the money you do need in time to boost your startup. But that said, if you do the bootstrap approach for a bit, and maybe have a founding team that can execute on your cool new app—design, build and distribute it—you may be able to grow just fine by the cash flows you generate.
Like I said, this is my third startup. For the first two, we raised small friends and family amounts, and that’s all we ever decided to raise, growing on existing cash flows.
Stay tuned for Part 2, where I'll have six more startup tips to help when raising a VC round.