The RIGHT way to raise money for your startup…

I feel like I get DM’d the same question every damn day.

“Hey Ryan, [insert situation], do u think I should I raise money?”

And to be honest, I never know what to say.

There’s no short answer. It depends on HUNDREDS of factors.

So instead of writing an essay, I’ve broken down the 4 paths you could take with your business, so you can decide what’s best for your situation.

But before we start, I’d like to preface this - I have friends who have actually been through EVERY SINGLE ONE of these options. This isn’t based on assumptions or what I’ve read online; my buddies have given me the inside scoop.

Okay, let’s go!

Accelerators

I know a guy who ran a crypto startup and went to the finals of an accelerator competition, but they ended up pulling the plug because they weren’t 100% confident in crypto. Ouch.

But generally, accelerators are FANTASTIC for startups, especially if you don’t have a mentor/investor already.

Here’s the lowdown:

Pros:

• If you’re selling a product to startups, accelerator cohorts are great way to get your first customers

• Countless entrepreneurs have followed the same path: Make a B2B tool (slack, dev tool, etc) > join a big accelerator > sell the product to your fellow cohort members & alumni > $$$

• Great for energetic and driven people who need some like-minded friends and experienced advisors

Cons:

• Some advisors may misguide you and cause you to miss/ignore signals from customers

• The accelerator only needs 1 company to succeed in order to win. You might get frustrated because it feels like nobody cares about your company as much as you do (which you’re right)

• Unrealistic expectations by the accelerator (either deliverables or constraints)

• Can become an unhealthy competition amongst cohort members (nothing wrong with healthy competition!)

• Accelerators are mostly interested in $B+ companies. A company doing $50M ARR is usually boring to them.

Investor Route

This is very similar to the accelerator route, but with a few key differences.

Small investors are more interested in cash-flow focused startups, whereas big ones are invested into moonshot projects ($B+). But, you do have some more control over who becomes your advisor/investor.

Plus, you aren’t in a “cohort” so you don’t get all the pros & cons that come with that.

Pros:

• Great if you have a clear direction and just need help getting started

• More control over deliverables, milestones & metrics

• Opportunity to align with investors who share your vision

Cons:

• Don’t have the accolades and network of an accelerator

• Harder to get intros

• Super tough to get big investors on board, especially on smaller projects

Bootstrap

This is by far the most unpredictable path you can take.

It’ll be chaotic. It’ll be stressful. But there’s unlimited upside if you get it right.

Pros:

• Great if you have enough capital to start the company

• Can generate profits to keep the company afloat along the way

• YOU HAVE FULL CONTROL OF EVERY ASPECT OF THE BUSINESS

Cons:

• May not be able to keep up with your competition (if they have investment)

• Fighting to keep your company afloat is stressful

Government Funding

Government grants are a lottery. They’re the hardest to obtain, but potentially quite rewarding.

Pros:

• Grants can be for insanely large amounts - Puget Buoy got ~$200k in grants over the course of 3 years and gave up 0% equity

• The people that review them aren’t entrepreneurs, they just check whether you meet the requirements. Just gotta make sure you tick the boxes.

• One successful grant could completely change the trajectory of your business

Cons:

• The government is not your friend just cause they gave you a little money. They don’t care about the growth of your company.

• Some grants can have ridiculous requirements (eg. you need a part-time advisor from a certain university).

• You’re competing with companies that have full-time grant application roles.

At the end of the day, there’s probably not a clear path you should choose.

AND THAT’S OKAY!

It’s completely up to you which direction you want to take your business. Just weigh up the pros & cons of each and work out which fits your business & your goals best.

Thanks for reading! And if you have any questions/topics you’d like me to cover in future shoot me a DM on Twitter.

Catch you next week 👋

Ryan, The SaaS Guy

Making SaaS less of a pain in the aaS, one step at a time.