Many startups think that they should raise money for their business. Though some businesses have been successful in doing so, it is not necessary to raise money. It might seem to be a very lucrative option at the beginning, but you will suffer a lot later. Here are the reasons why.
Expensive over the long-run
If you are in the early stage of your business and is not earning much profit yet, then the fund you raise will be your most expensive cash that you will buy. If you are not earning much money yet, then you are at a higher risk and so the venture capitalists will want a bigger stake for their support.
Having a vision
You need to have a vision. Come up with a five year’s vision and see whether you need that money to achieve your goals. If you don’t need it, you shouldn’t take it. If you really need money then there are other options than depending on equity financing. For example, you can go for debt financing.
Instead of thinking about raising funds, think of raising your revenue. Think of ways to sell your products or services. Increase your pricing and upsell to consumers.
Once you get more money for your business, your expenditure increases disproportionately to your income. But you don’t feel like cutting on the costs, so you borrow more money and the cycle continues. Cash is addictive. Once you start getting it easily, it’s very difficult to stop.