Timing

When should you raise?

As a first-time entrepreneur, I initially thought securing funding was the very first step in the journey —but I was wrong. Your primary goal should be to reach the strongest possible negotiating position with investors to secure the best term sheet. A favorable agreement helps you maintain control of your company's strategy and maximize your return on personal investment. For early-stage companies, it's essential to prove your big idea's validity through concrete facts, numbers, and customer feedback. When you can show investors that customers love your initial product versions, you'll attract more interest. In fact, investors might even compete for the chance to fund your company.

Don't send your pitch deck to any investor until you've reached that stage, even if your product only has a fraction of the features you'd feel comfortable with. Focus on getting the first version of your product out as quickly as possible. Since you'll likely be using your own resources initially, you'll be compelled to do so.

At the same time, consider a key aspect: think carefully about your own and your family's tolerance for financial risk and sacrifice. Ask yourself if you're prepared to use your personal resources to finance your venture until you seek external financing with the best possible mindset. Remember, raising funds will always take longer than you initially plan for.

With flyiin, I aimed at disrupting the airline distribution industry—an (too?) ambitious goal, right? The industry, in my view, was long overdue for modernization. Having gained expertise with the industry leader, I was convinced my venture would require significant funding from the start. Fortunately, we found an angel investor early on who shared our ambition and expertise. This remarkable individual became not only our financial backer but also a close advisor. With his support and funding—and some luck, we came close to successfully raising our seed round in 2017, two years after incorporating the company.

The consequences of mismanaging this early funding became apparent when this raise didn't materialize. Subsequently, I struggled to attract other investors to our grand vision. In truth, I had faced difficulties convincing investors from the beginning. While many venture capitalists agreed on the need to disrupt the industry, we lacked concrete facts and numbers to demonstrate our potential.

We spent too much money on designing a refreshing and unique experience, but not enough on building a basic version of our Air Travel Marketplace that real travelers could use to book flights. Such a live product would have given us the much-needed engagement data to prove how our marketplace resulted in higher conversions and Total Transaction Value (TTV). This lack of live data made it nearly impossible to make flyiin an attractive investment opportunity.

A year later, history repeated itself when we tried to raise much-needed funds for implementing our revamped tech vision based on our Airline DirectConnect Platform. We had achieved only limited traction (to put it mildly) in our target market. As a result, we had no choice but to accept extremely founder-unfriendly terms from the only investors we could attract to continue our journey.

Key Takeaway #15

One golden rule is to never, ever rush to seek external funding until the time is right. Instead, focus on building a small product, shipping it, and acquiring your first customers. This approach will provide you with more options and a stronger negotiation position when you're ready to raise your seed round.