Albert Wegner (Union Square Ventures) has today’s VC Post of the day titled If You Need To Raise Money, Get Your Financing Done ASAP. In it, Albert expresses his belief that given the current macro economic environment, companies should focus on getting their money raised quickly – as in right now. He’s conveying global / macro pessimism that many people are talking about. While there are obvious timing disconnects between the long term value of a startup (often much more than five years), there is often a sentiment shift in the funding environment – all the way through the funding supply chain – when the economy goes south.
While Albert’s advice is great, I actually feel this is advice that all entrepreneurs should heed all the time. Having been involved in plenty of companies that were flush with cash for a while and then woke up one day needing cash but finding the funding markets tight / dry / dismal, I’ve experienced the pain first hand of being an entrepreneur in a difficult funding environment. You can never predict when this is going to happen, so my point of view is raise the money when you can, make sure you know whether your existing investors can (or will be able to) fund you if the market dries up, and don’t optimize your timing in hope of a modestly better valuation.
Remember rule number 1 – never run out of cash.