I was participating sometime recently in an startup forum and there was usual debate on how to best raise the venture capital or any angel investment and then discussion diverged into one should raise it only when they need it.

Fair enough. This has been said so many times before, but rarely someone has talked about the fact that  one should prepare himself/team as if they really need to raise money from market.

Even if you don’t need to raise capital from VC ( which is good for you) there are certain benefits of mocking the idea that you need to raise the money and answering questions a typical VC would seek from you .

1. It brings discipline in you and your team: I have seen teams running or trying to run their business in a pot-luck style with no plans around why they are investing where they are and how long they will last with their current expenditure velocity. If you do the VC exercise, you and your team would know some facts about your own business and your money. Will help you to run your startup in a more planned manner.
2. It prepares the team to face and get ready to answer hard questions: VCs are tough nuts and they have to be because they are investing money without actually getting involved into your day to day operations. They pose tough questions and make you think outside all your emotions you have towards the product you are making and/or team you have in place.
3. It helps you validate: Once you are done with this exercise, I am sure you will end up with clearer vision, clearer milestones, clearer go to market strategy, clearer competitive landscape. ..you would have all your ideas flushed out clean and would be sitting in front of you in written. You can go back to it and validate how you are doing against it.
4. It actually prepares you ahead of time: Now that you have actually gone through mocking that you need to raise capital from VC, you are well prepared ahead of time( you never know). This would help you for your actual 5-15 minute session with the VC where he/she can figure out if this company has potential to go to next level ( they can actually figure it out sometime in 60 seconds).

I would love to know if there are people or teams which actually do this mock exercise. Also it would be good to know any professionals who can actually spend sometime with these startups and do a VC role play, pose tough questions and potentially guide them through actual fund raising from a VC.

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No matter who you are and what you want to accomplish, your relationships are going to play important role in your life. This is particularly very very important for startups as they are trying to create ’something’ out of nothing. Resources would always be less and time would always fly.

What can help startups is, their relationship with people in the ecosystem.

Just as an example, One of the most talked about topic between wannapreneurs ( individuals who wants to be entrepreneurs) is how to reach a Venture Capitalist. Many a times this thought gets into head and mess everything up even before individual has actually thought through the product/company he/she wants to make. This is beautifully captured in this post How to approach VC

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I talk about this a lot to my friends. Having a breathtaking technical breakthrough idea is not the ONLY way to start a successful company, what matters is ‘user experience’. Experience which can Attract new users, experience which can Engage users to stay on a use your product, experiences which can retain users to your product and experiences which are good to be Monetized in future.

Bit.ly a URL shortening company, which recently got funded with 2 million USD. Some people have shrugged the idea and told that its just 10 lines of code…so what? If they have been able to attract, retain their users to come back couple of times in day to use their services, I am sure they can monetize it as well.

I am sure VCs are no lame to fund them on any other ideas. They must have a team and potential plan which can be milked later, like analytics and click tracking as mentioned by Fred .

Good days ahead for Bit.ly

You should understand it as: “According to my very own limited experience and narrow understanding of reality, that’s very unlikely”.

I stole above line from a great deck by Fred Wilson on Startup Culture, Internet & Television.