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The right funding strategy  

Another good article by Roger Ehrenberg, this one about picking the right investment strategy for your startup.

In summary:

  • If you can generate cash flow early, bootstrap, and only raise capital when you absolutely need it.
  • If you need a bit of capital (up to $500k or so) to prove the concept, go to angels, but if you expect high exploitation costs (e.g. you'll need lots of sales people), get VCs involved in the round too.
  • If you need a lot of capital up-front, go to VCs straight away to have the relationships in place.

Seems obvious, but many people go straight from "I want to build a startup" to "I need some funding". Don't be one of those.

A couple of key points to add:

  • The less experience you have of running businesses and/or startups, the more you should aim towards the bootstrapping end of the scale. Very few people in the world can walk out of a VC office with $10m in initial funding based on zero business experience. So if this is your first business, build something you can monetise soon.
  • Be careful about the "involve VC firms early" thing. If they pass on you, it may be difficult to get other VCs interested.
More from the library:
Experienced entrepreneurs preserve equity
SEOmoz's funding story
Dropping out is probably not for you