Always Be Raising: What It Means & Why I Live by It
Unless you’ve been living under a rock, you know the stock market today is very volatile. After the latest inflation data came out on September 13, the Dow fell nearly 1300 points. That sharp drop scares investors. It also scares venture capitalists, who are likely running for the hills or in the ER trying to add oxygen back into their portfolios – hard to do in a downturn.
As for me? I live by ABR – Always Be Raising
Having capital to grow your company is important, but it’s key to surviving when times are hard. And most entrepreneurs drastically underestimate the amount they actually need. My advice? Think through how much cash you need today and double the number. Even if it feels excessive – trust me, it’s just right.
So why don’t most entrepreneurs practice ABR? Why not raise all the time? Simple: if it’s not for a lack of time, most are concerned about dilution. Of course, we all want a bigger piece of the pie. Who wouldn’t? But you can’t let this hinder your judgment. After all, the key is to make the company a big success, and I would prefer a relatively smaller slice of giant pie all day long.
So how do you practice ABR?
Enter equity crowdfunding, which can scale up as your business grows while allowing you to retain control. How? Say you go with the crowd to fund your seed round, and raise $300k from 300 investors (let’s use round numbers). You set the terms, so you can issue exclusively common stock – meaning you stay in control of the company. Let’s say you then go back and raise another $700k from 700 more investors. That’s $1M total with no loss of control on your part. Plus, as the founder, you only need to produce two years of reviewed financials to raise that amount – in the grand scheme of things, it’s a pretty low bar.
After that, you can raise your Series A, B and beyond in much the same way (just with audited financials). The time between raises is attractive too and can be as short as 1-60 days, not six months to a year.
Equity crowdfunding has also proven more resilient than VCs in today’s market. A recent KingsCrowd report found that the average check size for online investments grew in the first half of 2022, even as public markets turned bearish and VCs drew down funding levels. That’s a strong indicator of consumer confidence in equity crowdfunding and signals that it can be a steady source of capital for founders in times of volatility.
No matter how you choose to fund your business, markets and consumer appetites will change all the time. The best way to protect yourself and your company? Practice ABR.
