Are You Really Ready to Raise? What Every Founder Should Know Before Seeking Investment

So, you’re considering seeking investment for your start-up. Maybe you want to get a great idea off the ground and are unable to fund it yourself, or maybe you’re ready to grow - to market your business or develop your product and you need investment to do so. Generally speaking, most tech-based companies benefit from funding to accelerate their business and get their product to market. However, there are some downsides to consider and raising funds can be complicated.

In our final ‘Fund Her Future’ webinar for Breakthrough Labs members, we spoke with equity investors, legal experts, and founders to explore what female founders need to know before starting their equity fundraising journey and in this article we’ll share some of their key advice.We’ll explore -

• How to know when you’re really ready to raise funding for your start-up

• What to consider when seeking investment

• How to put together a plan for raising capital for your start-up

1. Raising Capital Isn’t for Every Business — And That’s Okay

Funding is not necessary for every business. Some are able to and may even benefit from growing organically. Remember that investment is both a privilege and a burden. You will likely be under pressure to produce a return on investment, or you may be giving away equity which means allowing others to have influence on your business.

Whilst there are many reasons to procure funding for a start-up, it’s not a must-have for everyone.

So, before you start putting together about decks, valuations or VC lists, pause and ask yourself these questions:

• Does my business actually require outside investment to grow?

• Am I ready to scale at the pace investors expect?

• Can I accept giving up some control?

As Vanesa from NoBa Capital shared, “VCs aren’t just writing a check. They’re becoming long-term partners in your business — so be clear on why you want that.”

2. Venture Capital Funding Requires Hypergrowth

In order to secure venture capital funding you must not only be able to logistically scale up at a significant rate - there are other factors to consider.

Aside from finance, building a business takes a huge amount of time investment and whilst growing any business always requires hard work and determination, the added pressure of having secured venture capital funding can be too much. It’s also a model that does not so easily enable you time to pause, review, correct mistakes and scale up at a rate that suits you (and your team).

Burn-out is a risk factor and it’s also important to be absolutely sure of the direction you want your business to go in, if you are looking to secure financial backing for that.

In our start-up funding webinar, Louise from HearstLab emphasised that venture funding only makes sense if you're aiming for significant scale and have considered the consequences of that.“VCs operate on a 7–10 year return cycle. If your model doesn’t support hypergrowth, VC might not be a fit.”

Ultimately, venture capital funding means being willing to sacrifice short-term flexibility for long-term scale. So, review your business model and be honest about the undertaking for you, personally, before seeking investment.

3. Think About the Trade-offs When Seeking Investment

You’re not “giving away” equity — you’re entering a high-accountability partnership. That partnership often involves:

• Board seats

• Investor oversight

• Strategic alignment and expectations

You’ll likely have launched your start-up as an innovator and/or creative. Yet, when you’re seeking investment, you will need to adapt and reprioritise.

As lawyer Malin Svanberg Larsen stressed, “Once you raise, you’ll be running two jobs — founder and fundraiser.”

Do your research and learn how to seek out and manage investors properly. This is a role that’s difficult to learn as you go, so consider attending learning events, such as those hosted by Breakthrough Labs, where you’ll meet and gather insights from investors and investment experts.

4. Prepare to raise funding

If venture capital investment is the right route for you then the next step is to plan. Fundraising takes time. It is often a 6-12 month process and it’s important to prepare for that. The next stage often includes dozens (or hundreds) of pitches.

Louise from HearstLab advises founders to first break potential investors into tiers:

• Tier 1: Dream partners

• Tier 2: Good fit, not sure yet

• Tier 3: May not be aligned, but worth exploring

  
  

She advises starting with Tier 3 to practice your pitch, then move up. This is a priceless piece of wisdom because there is a learning curve in seeking investment and it’s a common mistake to practice your pitch on your dream clients. Accept that you will get better over time and build up to pitching to the clients you really want to wow.

5. Be Clear on What You Want

Essentially, investment is about securing finance to help your business grow, but in reality it’s so much more than that. You should also be clear on what support you need beyond financial investment. For instance, would you benefit from - 

• Strategic input?

• Operational experience?

• Access to networks?

  
  

Most importantly - do your diligence on the investor. Some mistakes are inevitable when building a business but there are those that are detrimental - bad investment can be one of those so proceed with care. Don’t rush into an offer without doing your own research and scrutinising contracts. Balance business passion with caution and take time to ensure the right decisions are being made.

“The wrong investor can hurt your business more than no investor at all.” – Malin Svanberg Larsen, Lawyer.