Friday Q&A: Should Early-Stage Startups Raise Money to Hire Developers?
Every Friday, we’re answering your questions about business, startups, customer success and more.
This week’s question comes from Joshua, who asks:
Obviously there’s no blanket answer here that applies to all startups. But here’s my take.
There are things I would’ve done differently (and I’ve blogged about many of them), but raising more money isn’t one of them.
There are so many dangers to raising cash early on that I’ve seen materialize among friends.
One of the biggest is that there’s a really good chance that, like many startups, you may have to pivot to reach product/market fit. The investors who buy into your vision today might not love the thought of your new direction. A lot of people who think they want to invest in startups don’t truly have the stomach for what being involved in a startup really means, and they end up getting scared and becoming a distraction for the founder).
Dilution, too, is a very real de-motivator of founders and teams. You’re going to be paying a premium for capital when you’re still in the idea (or even prototype) phase, versus when you already have traction/customers and can get far more favorable terms.
It depends on your goals, too. For Groove, we wanted to build a sustainable long‑term business rather than a rapid ramp to acquisition. Going slow in the beginning and spending a ton of time talking to customers and refining the vision and product ended up being invaluable in the long run.
What do you think? Did you raise money early on? And do you regret it now or not? Let me know in the comments below!
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Your Turn: Ask Groove Anything
I’d love for this new weekly segment to be successful, and provide a valuable repository of answers from our entire community for entrepreneurs everywhere.
To do that, I need your help.
Here’s what you can do to get involved:
- Ask questions. Post them in the comments of this post, or Tweet them to us at @Groove.
- Answer questions. Every Friday, we’ll post a new Q&A segment. If you have anything to add or share regarding any of the questions asked, jump in! Many of you are far more qualified than I to speak on some of the topics that people ask me about.