This is the third of four posts offering practical advice to early-stage startup founders from an entrepreneur turned venture capitalist. Jonathan Shriftman is a partner at Expanding Capital, a growth stage VC fund that invested in companies like Coinbase, Cameo, Classpass, Postscript and Astra Rockets. Previously Jonathan founded Humin, an AI-powered address book that was acquired by Tinder, and Solé Bicycles, the first direct-to-consumer online bicycle retailer.
You can read the earlier parts of this series here:
Jonathan told us that 97 of the top 100 cloud startups raised money from venture capital. We asked him how a founder would know whether or not they need to fundraise.
Before I worked in VC, I was a founder. My first company was bootstrapped, but for my second company I took the path of venture capital. I’m not advocating that every company needs to raise money from VC, but if you look at the top 100 cloud startups, 97 of them raised money this way. If you’ve started a business and you’re wondering whether or not you should be trying to fundraise from VCs here are three signs that will suggest it might be time to raise some dollars.
1. You hit $1M ARR
ARR or annual recurring revenue is a metric that VCs to help determine the value of subscription-based or SaaS companies. Achieving $1M ARR tells venture capitalists that your startup is viable and is likely to benefit from capital investment.
2. You feel like you’re doing all the jobs
If you’re handing customer support, product management, growth marketing, it may be time to raise money and build out the team.
3. You are not achieving your big vision
Maybe you’re missing out on conferences, or you don’t have the financial resources to test growth marketing. Maybe you feel like you are being left behind. This might be a reason to seek investment from a VC fund.
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Tags: #InsideVC, Expanding Capital, fundraising