What I Learned from Raising Money - Part 2

Let’s discuss the good and bad of raising money for your business. I can only base this on my experiences and observations, every case is individual and there are always exceptions. But from years of advising founders through fundraising I have learned to distinguish between healthy reasons to raise capital and risky ones.

A strong reason to raise money is to accelerate something that is already working. This means having a proven model with steady customers, healthy margins, and clear growth.

When demand is visible and repeatable, and when you understand exactly what additional capital unlocks, investment can make sense. In those cases, money shortens a path you are already traveling.

Capital is crucial to operationalize your business. It is easy to become the bottleneck when everything flows through you. At some point, your demand will outgrow your capacity, and you will need to hire more people to increase your output. Investors are hungry for opportunities where you can clearly demonstrate how their money will grow something you have already proven.

When used correctly, capital gives you leverage that is difficult to achieve on your own. Small businesses are often held back from going after big opportunities because they can’t afford them. That might be fulfilling a massive purchase order or pitching on a major project. Having cash allows you to focus on higher value decisions and projects instead of day-to-day survival.

Cash flow is one of the most challenging aspects of growing a business. There is always a gap between when you get paid and when you need to pay your employees or vendors. This float period makes many business owners vulnerable because they essentially become the bank, bridging cash between multiple parties.

Raising money to float this gap is contingent on a history of consistent revenue. You need to know when and how you will pay investors back. Big contracts often come with long payment terms, combined with upfront production or labor costs that require you to pay your team while you wait to get paid. Once go through this many times, you'll have a strong understanding of forecasting this cycle.

In all of these cases, you have a business that is working and there is evidence to prove it. The biggest factor holding you back from growing is the cash to accelerate it.

The path I approach with caution is raising money too early. There are too many stories that sell the idea of starting a business based on an idea or prototype. You are asking people to pay you while you are figuring out how the business works. On paper this sounds ideal because it limits your personal exposure if things don’t work out. In the rare case you are fortunate enough to convince someone this early, here are some factors to consider.

Your investors will have influence on your business and their oversight will affect how decisions get made. This can be beneficial if you need the accountability, and I know many founders who secure a strong set of investors and advisors to guide the process. The earlier you raise money the more leverage you give away.

Capital will amplify everything that exists, including uncertainty. If you don’t yet know exactly what to do with it, money will not bring clarity. It will simply make the consequences of being wrong more expensive.

Having investors who also have a say in your business promotes a structural pattern of employment. I see this often with people who leave corporate careers to start a business. The desire to have financial stability while starting a company makes raising money an alluring path. This isn’t necessarily a bad thing, it just depends on the level of independence you desire.

Investment in any shape or form is debt. Whether it is structured as a loan, in exchange for equity, or comes from friends and family with “no strings attached,” you become indebted to those who invest in you. This is a big responsibility.

Many people will say that using other people’s money is the best way to take a risk. We also have the responsibility of caring for that money. The path of entrepreneurship is a journey, your first business is rarely your last one. Relationships and reputation matter deeply. If you are successful in getting your investors a big return, more doors will undoubtedly open for you. But if you burn those opportunities too early, getting a second chance may never happen.

For myself, being a Creator is about having agency. I’ve had partners and investors throughout this journey and looking back, I realize I brought these relationships into my business out of the insecurity of doing it alone. Now I’m learning how to generate value directly through a relationship between me and my clients, not through relationships with investors. It keeps my decision-making closer to the people I am serving rather than the people I would be making money for.

Learning when not to raise money became just as important as learning when to do it, because the time I spent trying to get investors to believe in my ideas I could have spent proving those ideas with customers and creating a model that didn’t require investment. Even after I built a strong network of potential investors, I realized there is a big difference between having access to money and being ready for it. If investors tell you it’s not the right time, but they keep the door open, make sure you step through that door when the time is right.

The order matters. Commitment comes first, proof follows, and capital comes after that. When you reverse that sequence, you end up spending your time trying to get someone else to believe in something you haven’t proven yet.

Once that foundation is in place, you won’t need to convince investors. You’ll have something worth funding.