Raising funds is crucial to all businesses. There are multiple ways to raise funds and looking for an investor is a very popular and effective way. There are multiple things investors look for before deciding to fund your business. But before that, an important question that entrepreneurs need to answer is when they need to start finding investors, particularly Start-ups. There are somethings that business owners must accept and keep in mind before they start looking for investors. Let us find out.
What is your Cash Runway?
“Cash runway” refers to the length of time in which a company will remain solvent, assuming that they are unable to raise more money. Cash runway and burn rate go together. In fact, your burn rate is necessary to determine your runway. Cash runway provides insight into your business’ success and can tell you if you are recklessly spending. If your cash runway keeps diminishing, that is not a great sign and should indicate you to cut back on costs or find a way of generating more income.
Cash runway is especially important for start-ups who are yet to receive funding. In most cases, start-ups take 6 months or more to secure funding and they are not immediately profitable and expect to burn through their financing over a specified period when they will either expect to start becoming a profit or seek another slice of funding.