Is raising investment right for you?

Although we spend a lot of time helping founders to raise investment, we also spend a whole lot of time telling people when it’s not right for them. For some businesses, private investment is the key to growth, especially in tech businesses where you have a high burn rate or need to invest in a lot of infrastructure or people to make your business a success. 

For others, investment just isn’t right. Not because of the current market conditions or because they don’t have the right deck yet – simply because the path to success doesn’t need to include outside investors. 

The investment journey is not unlike a rollercoaster. It’s fun, wild and unpredictable. But most importantly, once you’re on it – it’s hard to escape. So how do you know if investment is right for your business?

Raising investment means you have a huge exit goal, otherwise, why would investors take the risk? That usually means a handful of hectic years where your business comes first. 

On a recent episode of How I Built This, Bill Simmons, founder of The Ringer, spoke about his original conversations with VCs. 

He spoke about how investors needed The Ringer to become ESPN – a content juggernaut. But he didn’t want that (he ended up doing OK!) 

Investment is not for everyone. There’s nothing wrong with wanting a lifestyle business.

Having investors on board means having to be accountable to them at all times, it can be an intense and lonely journey – but one that’s so worth it if the conditions are right. 

When investment funds plan their financial forecasts, they’re factoring in winners, losers and those who will just get by. Of course, anyone who has set up a business believes there’s something unique about theirs that will cut through the market and make them money, but when it comes to raising – you have to be sure you’ll be a statistical outlier to make the struggle worth it. 

It all starts with your financial model, without that, you can’t consider raising anything. For an investor to buy in, they have to see a viable path to a sizeable exit – with a clear roadmap for how you’ll get there. This means starting with an end valuation in mind and working back to engineer a model that works at every stage. If the numbers don’t add up – or if you could grow your business organically, investment isn’t for you. No matter how unique your business is, investment only works well for founders when there is a clear path to exit.

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