Why startups shouldn't just take money from anyone who's offering it
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- Sarah Gantz
- Reporter- Baltimore Business Journal
- Email | Twitter
Raising money is an important step to getting any startup off the ground — but it's not the most important.
Entrepreneurs need to make smart decisions about who to take money from — and how much — without spending too much time with potential investors. Time spent knocking on doors, looking for cash is time away from building your company and its product.
"Financing the company, while strategic and important, is a distraction from building the company, in a way," said Josh Stella CEO of Luminal Inc., a Frederick cyber security startup that has raised $13.8 million before even launching its cloud management tool.
"It doesn't actually build your company. It's fuel for building a company," he added.
Stella was among three panelists who shared insight about fundraising at the state's CyberMaryland Conference at the Baltimore Convention Center Wednesday. Other speakers included Pascal Luck, a partner at Core Capital Partners; Mark McGovern, CEO of Mobile System 7 in Bethesda; and moderator Thomas Dann, who is the managing director of equity funds for the Maryland Venture Fund.
What investors really want to see is a strong product that fills a need in the marketplace and a confidence-building leadership team. If you dedicate your time to building a good product, you won't have to hunt down people to invest — they may be lining up to write you checks.
Generating interest among multiple investors is important because it means you will have a better chance of picking investors that are a good fit and negotiating good terms, Luck said. The people who invest in your company will be with you for the long haul, which is why it's important to be on the same page as far as expectations for the company. It also helps if work well together.
Sarah covers health care, higher education, biotech and technology.
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