Charles Hudson says raise when you have runway and 3-4 months of consistent growth, not when you're desperate. VCs split founders into two buckets: those who must raise and those raising to scale. You want to be the second group.
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Questions I get from founders is when to think about fundraising. And I would say on average, most founders I talk to think about fundraising dictated by the amount of financial Runway they have left. So oftentimes people wait until they have six months or so of cash left, maybe nine months, before they really start thinking about and planning their fundraise. I would like to suggest an alternative way to think about when to fundraise. As a founder, the best time to fundraise is when you have maximum leverage, which is usually when A, you don't actually need the money, you've got plenty of Runway, and B, the business is clearly growing and ramping. When you have those two things on your side, you're best positioned to fundraise. But let me also tell you a little bit about what's happening in the mind of many venture capitalists when you show up to fundraise. In many cases, the number one question a VC is trying to figure out when you present is which bucket does your company fall into? Because there's really two buckets. Bucket one is a company that's raising money simply because they're running out of money. And that tends to be pretty obvious. It's a company that doesn't have great growth, doesn't have strong product market fit, and based on the financial Runway available to that company, you as a VC know that they need to raise. The second bucket is companies that are raising money because something's really working and they need more capital to grow. This is the bucket that VCs are looking for, and this is the bucket that you absolutely want to be in with your company. So I would encourage you to think about is when it's time to fundraise. Just be honest with yourself about which of those two buckets your company's in. If you're in the needs to fundraise bucket because the financial Runway dictates. So that's common. It's just harder. So my encouragement is the best time to raise is when you've got plenty of cash in the bank and maybe three to four months of really solid month over month growth in the core KPIs that really matter for your business. If you can achieve that, you'll have a much more successful fundraise than you will if you wait until your financial Runway dictates that it's time to raise.
