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FAQs | Funding

Ready for VC?

Q: How do you know when you’re ready for venture capital?

  • Rather than knowing when you are ready for venture capital, I think the first question should be "do you need outside capital?" My advice would be to wait as long as possible to get outside capital, because you want your valuation to be as high as possible. And obviously, the longer you’re in business doing well, the higher the valuation.
    [Charles Heller, Director, Michael D. Dingman Center for Entrepreneurship, University of Maryland]
  • From day one the total amount of money we had in our company was a thousand dollars. When we went public we had millions of dollars in the bank. If you don’t need the money, don’t go for it—unless it’s a way of getting a superb partner. When we went out, we literally started with a thousand dollars, only because we had to clear the books. There was no money invested in the firm. It was all bootstrap. In fact, the only reason we went public was that we needed the currency to do acquisitions, we did not need the cash.
    [Mario Morino, Co-founder of Legent Corp. and Chairman of the Morino Institute]
  • I think there are a couple of reasons why you might consider outside capital. BST, my company, was similar to Mario’s in that we did not bring in venture capital for working capital. The first VC’s we brought in were to take their money to buy another company. I would say that the reason to have venture capital is if you’re constrained in your growth, number one, or number two, if you find somebody that you really believe can help you network and further your cause, and the cost to have them do that is a piece of your company. I would suggest you merchandise yourself and look for money, and when you need money, you’ll be ready. You’ll have primed the pump, so to speak. But I would not rush into it for the sake of having a VC on your board and their glamour.
    [John Burton, Partner, Updata, Inc. and Former CEO, Legent Corporation]
  • Don’t wait too long. Don’t go out looking for venture capital when you only have $100,000 left in the bank, because you won’t have a good negotiation point. If you have a little money in the bank or you are about to run out when you try to negotiate with venture capitalists, you don’t have a very good stand. So you need to raise it a little bit earlier than you need it.
    [Suzanne Hooper, Partner, New Enterprise Associates]
  • I have been to a couple of venture capital conferences recently, and have sat in on a couple of planning meetings for the MAVA conference. It’s clear that the companies that get to present will usually be institutionally backed. So there is a positioning and PR element at some point that people ought to consider.
    [Esther Smith, Founder, Washington Technology]

 

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