So you have your team all lined up, you’re incorporated, you have a working alpha and you’re preparing for Beta release to get some early customers and prove that your product works.
Now you’re thinking about getting some funding to take your startup to the next stage: to expand the developer team; pay the working co-founder a basic salary; market your idea and create buzz.
*What is the best strategy for fundraising?*
I’ve been getting conflicting advice on this. *I hear it’s easier to raise money for 1 year’s worth of operations.* But I’m also being told that *it is also a good idea to fundraise for up to 2 years of operations,* because a founder shouldn’t spend all his/her time raising money. This might give you more time to reach profitability, or get to some other potential exit, such as an acquisition by another company.
*Are VCs more likely to fund your project for 1 year or 2?* Do they prefer to give you money under the assumption that there will be no more fundraising rounds, meaning they are less likely to be diluted? I’ve heard horror stories about VCs pushing startups to get lot of money in a series A, in order to put off a Series B. This is so they can lead any subsequent rounds — at a lower valuation — which benefits the VCs. But does benefit a founder?
I would really like to understand and get some tips on how founders can lay out their funding strategy before going to a VC or an Angel.