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

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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