Most startups raise money too often and for the wrong reasons. The ideal time to fundraise is when you have a working capital problem: a repeatable process where $1 invested returns $5 in six months, letting you repay investors while keeping the surplus. Without clear unit economics and product-market fit, you're just going on a fishing expedition.
When should you raise capital? This is a question that comes up a lot, and I think that particularly because tools and technology are so fast-developed now, there's a reasonable case to be made that raising capital should be a lot rarer than I think a lot of people have been trying to make it go. The best use of capital is going to be what's called a working capital problem, which is, hey, you have a situation where if you spend a dollar today, you'll get $5, I don't know, like 6 months from now, right? And what you're trying to do is create a mechanism by which you can finance so that you can be spending that $1 today, getting that dollar $5 from now, you can pay off your investor with, I don't know, $2 based on having borrowed a dollar from them or raised that money from them through equity, and then, hooray, you get to keep $3. Everybody wins, right? That is the basic engine of having a repeatable process that can turn into a lot more money for everybody and that's therefore financeable. Most businesses that I talk to don't have that yet, right? They don't have that product-market fit and they think they're going to raise money so that they can go on a fishing expedition. Most won't focus on their repeatable process.
