If you don’t know what your first step is in building your business, you’re not ready for capital. If you can’t get a prototype or at least some mockups and good description of your product together, you’re not ready for capital. If you can’t find anyone who would buy your product right now if it existed, you’re not ready for capital. In all these cases YOU NEED HELP. Money isn’t going to solve your problems with traction, selling is. Money isn’t going to make your business successful, but you can with hard work and a whole lot of hustle. Money doesn’t make bad things good, but it can make good things better.
I’ve made this mistake plenty of times in my life, and I’m sure I’ll make it plenty more. Sometimes you just love a business, or your team, or your idea. All you need is a few hundred thousand from your friendly neighborhood angel and you’ll be the NEXT BIG THING. You don’t want to realize the truth: it’s bad. It’s so bad it’s rotten. It can’t be saved. When you do realize the truth, you’ll be heartbroken. That’s OK. We need people just like you to get heartbroken over businesses and to move on to their next idea. Those people build great companies. maybe not on their first try, but someday.
Someday you might realize the opposite entirely: you’re too successful. You’re growing too fast and you don’t have the manpower to handle it. That’s when your team counts more than ever before. They’ll count double when you have to step away for 3 months to go raise capital. When you come back with your newfound cash in hand, they’ll cheer at the thought of the new hires who’ll help them handle the workload.
Money is best raised and best used for one of two things in business. To grow faster or to learn how to grow faster. Those may sound like the same thing, they’re not. They may sound like I’m saying spend all your money on fancy growth advisors (like me). I’m not. If your company is growing faster than you ever imagined and you’re having difficulty financing the things you need to keep up, then you’re going to need some growth capital. That may be an equity investment, that may be venture debt, or it may just be a line of credit. You need to find the right source for you, as each one has unique advantages and disadvantages.
If your company is small and looking to accelerate growth or if growth has slowed, it may be time to look at capital as well. In this case though, the numbers are smaller and the use is very different. This money would best be spent by experimenting with a variety of new growth ideas to generate traction. When one proves to be promising, then more money can be spent on it to grow the channel. In this case, either a small line of credit or an angel investment are the best options. The goal is to find a way forward, not accelerate growth.
Now that we’ve established when you actually do need to raise capital, let’s talk a bit about finding help. Go to your local provider of mentors be it SCORE, ITEN, Co.Lab, or whatever they call it in your city. Ask them for help and make sure you have your problem clearly defined. Reach out to your successful friends and the local success stories who are now trying to give back. They want to see you succeed. If you need help and you’re honest about it, you’ll most often get it.