Angel Funding: When It’s the Right Time to Raise — and When It’s Not

It's not about whether you should start up. I'm going to guess that you've already started your dream business. "Should I raise money for my business?" is the question now. Is now the right time?

As the founder of LVX, my main job is to find startups that are ready to get angel funding and put them in touch with the right investors. I also learnt that founders aren't sure when to raise money, how much to raise, or from whom after working with more than 500 of them. I made a simple cheat sheet for founders that I thought would help them answer some of the most common questions that come up.

Of course, not every decision in life can be parameterised; there are always corner cases and outliers. 

Getting angel investment means giving up some of your equity in exchange for money. You are now responsible for your work, actions, and decisions to a group of investors who have chosen to put their own money into your dream. It means that you are on a treadmill, and sometimes people who aren't involved in the day-to-day business control the speed. You can't get off the treadmill. The speed goes up with each new round of funding. This is the bad part.

The good news is that getting more angel investors means you have people who care about your business and can help you when things get tough. It does help a new business become more disciplined. I think that as founders, if you can provide good governance and regular business updates, your board will be more involved and investors will be more willing to help when needed. Don't give investors bad news that they weren't expecting. This is the most important rule to follow when working with them.

Now the question is: Why do I need to get money for my project?

If you answer this question honestly, it will help you come up with a good plan for how to raise money. You need to think about this very carefully if your answers have anything to do with other people or businesses.

When You Should Raise Angel Funding

1. You’re all-in on this business for the long haul — no Plan B, ready to ride out the lows and seize the highs.
2. You have a clear, strategic use for the money and know the milestones it will help you hit.
3. Your venture can scale with technology, deliver strong investor returns, and you value investors as true partners.

When Not to Raise Angel Funding

1. Because someone you know did it, or you think it’ll get you press and attention.
2. Just to have extra money, feel more comfortable, or figure out spending later.
3. Simply to test an idea without a clear plan.

If any of these sound like your reason, pause and rethink — why you want the money is one of the most important decisions you’ll make as a founder.

In the end, every investor knows that 90% of new businesses fail. But that doesn't mean that founders get money for the wrong reasons. I think that getting money is not the goal in and of itself; it's a way to reach the goal. And the goal needs to be clear and high!

This post was originally written by Shanti Mohan, Founder & CEO, LVX

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