Do you think your first port of call as an entrepreneurship is to raise venture capital (VC)? John Mullins shows you why you should think again. John Mullins has now started a free MOOC through Coursera called 'How to Finance and Grow Your Startup - Without VC'. www.london.edu/financeyourstartup

1. Entrepreneurs might
assume their first port
of call is to raise venture
capital (VC) to grow their
business. But there’s
a better way.
Customer funding.
Don’t raise early
venture capital.
Wait.

2. 2
Raising capital requires full-time
concentration, but so does starting
an entrepreneurial business. One will
suffer.
Why not raise money later
when the business is less
fragile?
1
It’s distracting
5 reasons not to raise early VC

3. 3
Sadly, most treasured plans
painstakingly pitched to early stage
investors are unlikely to come off.
Even ideas that do succeed do so
in unpredictable ways.
Proving the merit of your
idea, based on accumulated
evidence and customer
traction, is much more
convincing than your
charm in a pitch.
2
Proving merit is better than pitching
5 reasons not to raise early VC

4. 4
The further you progress in developing
your business, the lower the risk,
as early uncertainties become more
certain. Less risk translates into a higher
valuation and a higher stake for the
founding team.
3
It’s a risky business
5 reasons not to raise early VC

5. 5
The terms and conditions attached to
institutional capital are (for good reason)
onerous, as investors seek to protect
themselves from downside risk.
The further along the path, the less
onerous the baggage.
4
Terms and conditions will tie you down
5 reasons not to raise early VC

6. 6
Raising capital, even in the best of times
for the best of ventures, is a difficult
task!
Why make it even harder by trying
to do it too early?
5
It’s hard to do
5 reasons not to raise early VC

7. 7
3 reasons to get your customers to pay
Starting up modestly might not be what
you always dreamed of, but the small
amount of money that customers will
give you enforces frugality, which is only
a good thing.
Having too much money can make
you sloppy, even stupid, if you’re not
careful.
1
Benefit from frugality

8. 8
Without an investor to please,
your focus can be on satisfying your
customer instead. Plan A rarely works
as expected, so the faster you find
a Plan B that works, the better.
2
More freedom to adapt
3 reasons to get your customers to pay

9. 9
Once customer traction is proven,
if you decide to raise capital to grow
faster, you’ll do so on vastly better
terms. You’ll be driving the bus,
not your investor.
3
Stay in the driver’s seat
3 reasons to get your customers to pay

10. 10
Many successful customer-funded
businesses go down the VC route.
But before doing so, they
wait.
Don’t raise early
venture capital.
Wait.

11. John Mullins is Associate Professor of
Management Practice in Marketing and
Entrepreneurship at London Business School
and author of the widely acclaimed
book The Customer-Funded Business (Wiley
2014).
His latest project is ‘How to Finance and Grow
Your Startup – Without VC’, a free MOOC.