An article we liked from Thought Leader Wil Schroter of Startups.com:
The Risk of Trading Vulnerability for Opportunity
"I'm just getting started and thinking about giving away some equity for a Co-Founder and some early investment. It sounds like a lot of startups do this, but is there something I should be considering before I hand out all of this equity I won't get back?"
The most expensive time to raise capital is when we're most vulnerable.
This paradox is the heart and soul of where we get leveraged as Founders, particularly when we're giving up valuable equity. What we need to do in those vulnerable moments is step back and ask ourselves "Is this the best possible time to take on dilution or can we find a way forward that costs us less later?"
If we've never built a startup before, we may not even realize how important this question is. For those of us that have, we're hyper-aware of how badly we get beat up in our previous startup by not being more mindful of protecting ourselves when we were most vulnerable.
Our goal then should be identifying our moments of vulnerability and crafting a more viable path toward minimizing the cost.
Time is (Expensive) Money
More often than not, we're raising capital because we want to accelerate time. Whether we want to hire some more developers, increase marketing spend, or just have enough cash to quit our day jobs, we're trying to speed something up.
We justify that acceleration by saying things like "Well if I don't raise this money the product will never launch!" or "If I don't capture this market my competition will!" and there is some truth to that, but far less than we tend to imagine.
Our approach should be "Raising money is our last resort at this stage because it will be preposterously expensive compared to when we need it later — so what can we do to avoid raising money?" In case we forget in this moment, the majority of businesses don't raise professional capital in their...
Read the rest of this article at startups.com...
Thanks for this article excerpt to Wil Schroter, Founder and CEO at Startups.com.
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