People & Human Resources

We need money for expansion but are VCs the way to go?

Andrew Sadauskas /

Dear Aunty B,

We have agreed to start looking for expansion funds, as we can’t grow fast enough by reinvesting profits.

My partner, who is very gung-ho, has drawn up a list of VCs to start contacting and begin a conversation, but I am not convinced this is the path we should take.

We need the money in about a year’s time and I feel we need to start preparation now before we see the VCs. We are a young company, with a good track record, and a growing reputation in our industry with global potential. We will need about $1 million for international expansion.

Planning Ahead

 

Dear Planning Ahead,

Your answer is unlikely to be VC funding. Look, I had a look at your company online and you don’t seem to have a board. While you present as extremely professional, you and your partner are also young. You have done a great job getting the company to where it is now but you need some grey hair.

What I would do is approach two people very well known in your industry who would join your board. They may take a tiny amount of equity in your company instead of fees or otherwise you can find $15-$20,000 a year to pay them. Make sure they were entrepreneurial and stay away from lawyers and accountants unless they have a proven track record in building companies.

Their job is to ensure the strategy is sound, get you investment-ready

(I bet you end up needing more than $1 million) and then work with you and introduce you to people who will assist with the capital raising and high-net-worth individuals. I would suggest your pitch at this stage is to investors and not VCs. VCs are your next step.

Be smart,

Your Aunty B

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Andrew Sadauskas

Andrew Sadauskas is a former journalist at SmartCompany and a former editor of TechCompany.

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