To fundraise or not to fundraise: what's right for your startup?

September 20, 2024

Whether you're a first-time entrepreneur or a seasoned founder, the decision of whether or not to fundraise for your startup can be daunting. Here are some things to keep in mind before you decide on a concrete path forward.

1. Understand your business' financial needs

Before seeking investors, it's essential to have a clear understanding of your business' fundamentals and financial needs. Take the time to evaluate the pros and cons of fundraising versus bootstrapping.

While external funding can provide a significant injection of capital, it often comes with the trade-off of diluting ownership and control and managing multiple personalities. On the other hand, bootstrapping allows you to maintain full control but may limit your growth potential. Consider your long-term goals, the resources required to achieve them, and what you currently have on hand.

2. Explore different capital options

Equity financing involves selling shares of your company to investors in exchange for funding -- this is what angel investors on Cherub's platform provide.

Debt financing, such as loans or lines of credit, allows you to borrow money that will need to be repaid with interest.

Grants provide non-dilutive funding and are often available for specific industries or purposes.

Crowdfunding offers a platform for raising funds from a large number of individuals who believe in your vision.

3. Identify your strategic needsĀ 

The right fundraising method should also align with your vision and bring more than just capital to the table.

If you'd like to retain full control of your company and just need a quick capital boost, then debt financing may be the right path for you right now. However, if raising money is about gaining the assets to grow your business both financially and through new experts, networks, or advisors, equity, grants, and crowdfunding can expand your opportunities to scale.

Real-life examples

To illustrate the diverse paths entrepreneurs can take, let's explore a few real-life case studies:

Case Study 1: A tech startup decided to prioritize self-funding and slow growth. By bootstrapping, they maintained control over their business decisions, allowing for sustainable profitability without the pressure of external investors.

Case Study 2: An e-commerce company recognized the need for rapid scaling and opted for early-stage fundraising. While they secured the necessary capital, they also faced the challenges of meeting investor expectations for rapid growth and profitability.

Case Study 3: A health-focused startup successfully secured a significant grant, enabling them to bootstrap their business without giving up equity. This non-traditional route provided the resources they needed to establish their brand while retaining ownership.

Deciding whether to fundraise for your startup is a pivotal moment in your entrepreneurial journey. Fundraising beyond debt financing is nearly a full-time job in its own right but can be super rewarding. Ultimately, the right path for your startup depends on your goals, values, and growth ambitions.

If you choose to seek investors, Cherub's network of strategic angel investors and advisors looking to support high-growth businesses can help provide warm intros and match you to people you might not have met on your own.