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5 Key Myths About Raising Venture Capital

Patrick Henry

When and how should an emerging company raise money from venture capital sources? The timing of when to raise money and the source of that capital are both very important decisions for startup companies. Depending on what area a startup specialises in, they may find themselves with a better chance of receiving venture capital investment. For example, an investor like Lindsay Rosenwald likes to assist companies helping to drive forward advancements in technology and medicine, meaning that these startups may stand a better chance of receiving venture capital investment.

As an entrepreneur, you want enough capital to build and grow your business, but you also want to preserve as much value of the company as possible for yourself, your cofounders, key managers and employees.

Company founders that have a good business idea with no independent source of capital will likely need to raise outside funding to help their companies grow. Venture capital is one of the most natural places to seek growth capital for a startup.

However, a good rule of thumb from my perspective is to wait as long as possible before you to go VCs to finance your company. And if possible, never raise VC money at all.

A big part of my answer is based on what I believe are some of the key myths and realities about raising money from VCs. The key myths are as follows.

Myth one: Getting a VC investment validates my business plan.

Myth two: VC is the best source of funds for my startup, and the only place where I can raise sufficient capital to fund my business plan.

Myth three: VCs can add a lot of value to my company and board of directors based on their experience.

Myth four: I can raise some �dumb money� from second-tier VCs and preserve my valuation.

Myth five: Getting seed or Series A investment from a top VC will pave the road to later rounds of financing.

As the CEO of QuestFusion, I work closely with clients and my team to define the right engagement strategy for your company. I�ve been the CEO of four different startup companies, including QuestFusion. I took a company from pre-revenue and pre-product through a successful IPO and a billion dollar valuation. I have personally raised over $200 million in equity financing for my companies, and been directly involved in over $2 billion of M&A transactions. As such, I have intimate hands-on experience in the process of building businesses and raising capital, including significant amounts of money from VCs. I have been in your shoes, the shoes of an entrepreneur and startup CEO, and I�m now applying my decades of experience in building companies to advising and guiding other entrepreneurs, and helping them to build their companies.

Download our free guide on The Practical Realities about Raising Capital for Your Startup. I hope you find this information helpful.

If you�d like to get a complementary assessment of your business plan presentation or executive summary, please contact us. At QuestFusion, we love working with entrepreneurs, and we will work hard to help your company become the next great startup success story.

This is Patrick Henry, the CEO of QuestFusion, with The Real Deal�What Matters.