For a startup, the founder has to focus on a lot of business functions. In the initial stages it is not surprising for a single person to look after operations, sales, HR, finances, or marketing. But as the business scales up, it is important that a proper ecosystem is developed to cater to additional team members to handle specific functions.
While some may approach ‘bootstrapping’ as a way to finance company growth, some may get the golden opportunity for getting external funding. When business traction meets investment funding, the potential to scale goes up significantly.
If you are wondering why investment funding would be a good idea, then check out these reasons. These compelling pointers aptly denote why funding matters if your growth has to match your aspirations:
With funds available to scale operations, you can eliminate barriers to success. With the right amount of funding at strategic intervals, business functions can be coupled with investment into the next stage of growth. However, with the availability of funding, the necessary steps should be taken for proper allocation to avoid cash burn and not having anything to show for it.
Every business passes through different milestones. Initially, the setup may be small with few client orders. For this, bootstrapping would be sufficient. However, as you gradually expand operations, you may need the same growth in funds being pumped into the business. When this is not possible through own means of income, it makes total sense to look externally for investors.
Dropbox and Airbnb are prime examples of how looking outwards for funding added advantages at multiple levels. They were not only able to raise funds to grow quickly, but also got valuable mentorship from the investors. Since the investors were industry experts, it definitely helped the beneficiary company to accelerate growth.
The current level of competition in the market is immense. In order to sustain operations in such a climate, it is important to match international standards of business. Fundraising will be an important driver in this aspect.
This one is a no-brainer. With fundraising, the financial goal of every department within the organization can be met. It helps to start the process of growth and see tangible results when you have been funded by an equity investor.
While it may look all rosy after getting the funding, do keep two things in mind –
1 – You would be diluting equity for obtaining the funding. Hence, be very clear to seek only that much amount that you are looking for, and not more.
2 – When you are a cash-rich organization, there is a likelihood to splurge unnecessarily. Keep a check on impulse buys and allocate funds only to the most critical tasks/teams
With funding, your startup’s growth can be accelerated substantially. It not only helps meet financial and strategy objectives, but also gives you the much-needed edge needed to survive and thrive in a competitive environment.
Are there any other reasons why funding and fundraising are important to you? Do write to us and let us know.