We’re going through an unstable time, and these are the stages of business cycles when most entrepreneurs brawl with their fund-raising plans. They start ruminating on question like whether it is the right time? Will I be able get funding? How much funds should be raised and at what terms? So, let’s break this shackle of unlettered and untutored zone on Ffnd raising by asking yourself one simple question?

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Are you profitable?

If the answer is yes, then do you’ve the cash reserves for continuing to grow and keep gaining market share for the next 18 months?

Scenario A: If your answer is again yes, then this is the best time to raise capital as you can do so on your own terms. You might have an upper hand on deciding your valuation, type of investor and the round size. So go out there with your head high and kill your competition.

Scenario B: If you do not have the cash reserves to gain market share but are confident of your product beating the competitors then definitely plan your fund raise.

Tip: Don’t go all out! Raise less capital if the valuation is not to your liking, also choose venture capitals as they might help you in future rounds and also provide you with debt.

As raising capital is better than eroding your competitive position. Remember, If you lose market share, it will make your future fund raises more difficult and worse.

If you’re not profitable, do you have 18 months to survive your current burn?

Scenario A: If you have adequate cash to last more than 18 months, then start pushing your key metrics that improve your attractiveness, as you will be out for fund raising soon and don’t forget the more you shine, the more value you fetch.

Tip: Max-out on your top-line as valuations are generally based on ARR (Annual Run Rate).

Scenario B: If no, then you already know that you’re melting, do fund raising on fire as deal closing in this sluggish market might take up to 4 months. Start by talking to your current investors as they might offer you the best terms as they’re already aware of the scenario you’re through. Discuss with them at what terms would they like to show interest and start building an internal consensus on it. Later, start pitching your deal to external investors and be prepared to accept painful terms and valuation. As they might assess the deal with a different risk-reward ratio in mind.

If your company is still struggling to raise capital then it would be suggested that you reassess your company situation and be open to exploring a majority sale to a strategic investor, before value of your company erodes further.

The author, Sahen Karamchandani, is Founder at WealthinIndia.com

First Published:Feb 15, 2023 7:12 PM IST