When raising seed money, do startups usually acquire money as it's committed, or do they wait until they reach the total goal?
Answers
A rolling close is quite common and often a necessity. But think about if there's a minimum threshold of dollars needed to get started. No sense in wasting investors' money and your time if you don't end up raising enough to get things going.
Well said, Tom. In my experience a single investor in a financing round can and will be more flexible around multiple closes, however, if several investors will be required to get to the required amount of capital to fully fund the company, no investor wants to be the first money in without assurance that there will be sufficient for the company to meet key milestones. As a result, most investors will require that a minimum amount of funds are received before they will allow any to be withdrawn from escrow. It is an important protection for the investors and, frankly, for the company to assure that it does not start spending in advance of having sufficient cash on hand only to find that other investors delay or cancel their commitments.
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Hi
I liked your answer however i still not sure how i am supposed to deal with the evaluation of the fund raising as i don't know how much i raise until completing the process, or find the main angel that will take the lead -any advise is highly appreciated
I have experienced stock subscription agreements that include closing ranges, say $500,000 to $1,000,000. That way, you can protect new investoRs by setting a bar that is meaningful and elastic in terms if enabling the Company to move forward, but leaves the door open to raise more investment if there is demand. In a start-up situation the window from first close to final close should be short enough that the investment has not been spent, and the valuation not have changed significantly!
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same is here...
I liked your answer however i still not sure how i am supposed to deal with the evaluation of the fund raising as i don't know how much i raise until completing the process, or find the main angel that will take the lead -any advise is highly appreciated