5 Tips to Help You Decide Whether Now is the Right Time to Raise Money for Your Startup

There’s no substitute for good, old-fashioned grit when it comes to starting a business. But for some entrepreneurs, raising capital to get their venture off the ground may feel like a crutch.

Data from 2011 to 2016 compiled by Crunchbase has shown that any time of year is ideal for seeking startup money from angel investors or venture capitalists. Of course, there likely will be strings attached and high expectations on returns, with some investors demanding 20-30% year over year.

So how do you know now is the right time to actually pull the trigger and start securing funding from outside sources for your startup? Consider the following:

  • What types of funds are you trying to raise?
  • What stage is your business in?
  • What other means of securing funding are available?
  • Is this a good time of year to seek angel funding or venture capital?
  • What is my intuition telling me?

1. Angel Funding Versus Venture Capital

Angel investors and venture capitalists both seek innovation when looking where to spend their money. They are typically drawn to technology and scientific startups, but that’s where their similarities end.

Angel investors are individual financiers, while venture capitalists usually operate in an organized business, like an LLC. Angels, who are typically high-wealth individuals, fund businesses out of their personal assets, selecting startups based on terms of equity stake. Investments can range from $25,000 to $100,000 – or up to $750,000 if a group of angels unite on a particular venture. Keep in mind that these numbers are at the discretion of the angel and could vary widely.

In comparison, venture capitalists have a pool of money to draw from corporations, organizations, foundations and pension funds. They carefully choose the investment that is likely to produce the best return for their organization. Investments can average $7 million in a startup, with that numbers dependent on a number of factors.

Working with angel investors or venture capitalists comes with strings attached for the startup in the form of equity stake and agreed upon returns.

2. Business Maturity

Raising money too early in the stages of your startup has potential downfalls, according to serial entrepreneur and venture partner Dave Bailey. Some of his reasoning includes:

  1. Early fundraising discussions can lock in bad assumptions from investors.
  2. Raising funds early on limits experience that offers opportunities to gain new skills.
  3. With funds, entrepreneurs will likely hire more people to do some of the thinking and legwork for them; this also negates valuable experience and encourages “over-building.”
  4. Investors offering money early on have all of the negotiating power.
  5. It starts a cycle where you may feel like you always need more to compete.

Venture capital is unique in that it offers funding rounds for different stages of a company. For instance, Series A or Series B correlates with objectives and loosely with business stage. See our Crunchbase glossary for all of the funding types available.

If you receive Seed or Series A funding before you have a plan for meeting business objectives, it may be challenging to secure subsequent rounds of funding.

3. Other Funding Options

While angel funding and venture capital are two avenues for seeking seed money, entrepreneurs may initially want to forgo those options and try a different route.

The most convenient answer would be to put up their own money. If that isn’t possible, entrepreneurs might opt for a personal or business loan or line of revolving credit.

In addition to establishing your own credit or personal capital, Inc magazine wants you to consider:

  1. Federal grants and other sources of donated money.
  2. Strategic partnerships like vendors and distributors who are willing to buy into the business to establish a relationship.
  3. Bootstrapping by paying for things as needed.

4. Time of Year

While we stated earlier that any time is a good time to ask for money, if you seek venture capital, our data suggests securing investors at the beginning of the year. Almost 32% of all venture capital rounds are distributed between January and March.

Additionally, many nonprofit organizations have major fundraisers in the spring. Entrepreneurs may want to consider making an ask for venture capital when the competition is low, considering only 20% of funds are given out between April and June.

5. Your Gut Instinct

There’s something to be said about going with good, old-fashioned intuition. After all, it’s your business sense and natural acumen that put you in the entrepreneur seat, to begin with.

When deciding if it’s the right time to ask for angel funding or venture capital, trust your gut. If it doesn’t feel right, move along. Don’t enter into a funding relationship unless you are reasonably sure that you can deliver on expectations.

Susan is a writer, contributor and content marketer who publishes her own blog, Marketing and Murder. Susan’s greatest successes include a fruitful 10+ year career in marketing and outside sales, as well as a master’s degree in a liberal arts field and just being a Mom to her young daughter. This piece discusses when to pull the trigger on fundraising for your startup.

  • Originally published September 6, 2018, updated April 26, 2023