Raising Money Accomplishes Far Less Than We Think

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Many entrepreneurs think that if only they were able to raise money for their business, that would be enough to help them turn their business into a success. Yes, money helps. But money alone is not nearly as useful as people imagine it to be. Money has a way of running out quickly. I want to share with you my own experience in raising money to illustrate and explain why money isn’t as helpful as it seems it would be.

A number of years ago I was working on my first real start-up company. That company eventually failed mostly due to my inexperience, but never mind that. The story has some lessons to be learned regardless of the eventual outcome of that business. During the very early stages of building that business, I was trying to raise from $25,000-50,000 which is a very reasonable amount for a seed round investment. I had met an investor and pitched him my business. He didn’t invest because he saw that I was too much of a beginner, and my business idea didn’t appeal to him much either. I was very disappointed. I felt that if only I had gotten around $30,000, that money could have funded the company for a few months by helping me and my team mates pay rent and cover business expenses, and that would have been enough to make that business a success.

Since I didn’t get that money from an investor, I went ahead with the business anyway, and dipped into my savings a little to help the company move forward. Ultimately, the amount of work that was put into the business was the same as it would have been if I did get the investment. And what do you think happened? First of all, the amount of time needed to create a serious company was more than the money I was seeking would have provided. Second, even after double or triple the time I thought I needed, the company was still in nascent stages. Looking back at it, I realized that this money that I once thought would have been so helpful, would have simply been wasted and I would have been in the same situation as I was without getting the investment.

There are two takeaways that can be learned from this story. The first is that getting a cash investment is not nearly as helpful as the entrepreneur thinks it will be. Without a great business strategy and direction, the money will run out pretty quickly. That brings me to the second lesson that can be learned from this story. If someone on my team had a wealth of business experience, and helped me steer the company in a viable direction, that would have helped the company survive much more than cash ever would. One gross mistake can take month of time to implement, fail, and scramble to recover from. And a good advisor can help you avoid many such mistakes along the way.

With that in mind, my advice is to seek very good advisors rather than cash. It will be more difficult in the short-term without the cash, but your business will have a far greater chance of success if you get a great mentor or an advisor.

More On Fundraising: Full Fundraising Book

If you found this helpful, you can check out the full fundraising book. This article is just a section in that book and serves as a nice sample. If you are curious check out my full fundraising book on Amazon.

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