What You Need to Know Before Capital Raising

Capital Raising

Getting money may not be difficult but getting money at the right time and on the right terms is what matters. This is what capital raising is all about. Firstly, you need to determine how much money you need. You should always ask for more than what you actually need. Remember that getting cash is cheap but selling equity is not. It gets really difficult to retain your stake in your company once after you have sold it. Therefore, it will be good if you borrow money in smaller rounds especially in the start up phase when the value of your company is low. Figure out how much money you need to reach your goals. Here you should ensure that you need to raise sufficient capital which helps you to run the company as well as achieve the milestones. This is because you will have to bear the operational costs of a particular project.

Now, the question is that when do you need to go for capital raising. Always start the process of capital raising before the actual need arises. This is because you always need the money sooner than you think you need it. It’s no use trying to douse the fire after the whole house has crumbled down to debris. You should be always proactive. If you are planning to take a bank loan, start financial planning 3-4 months in advance. For angel investment or venture capital, at least expect 3-12 months. You must always be prepared for a long haul. Also ensure that you have a strong banking relationship so that, just in case there is a gap between the capital you expected to raise and the capital you actually raised, you can bridge the gap with the help of a bank loan.

It’s important from who you raise your capital. If you plan to go for capital raising, look for people who you like and respect. It should be noted that you and your investor will be together for quite some time. You will go through the ups and downs together. Therefore, you should choose someone who is quite aware of this fact, has knowledge about what business you are doing, etc. Capital raising is not a very easy task. You will need to make a few compromises after you borrow money from someone else. You will be accountable to the investor; the investor might interfere in your policy decisions. You will lose equity and control. Keeping these things in mind, take your decisions carefully and go for capital raising.