This is part of our Frequently-Asked Questions series. Be sure to also check out Finding a Teammate, Starting a Scalable Non-Profit and Understanding Whether Your Idea Is a Business.
It’s common for new founders to see raising venture capital as the first step in their startup journey. However, investors don’t invest in ideas, products or technology — they invest in businesses that can generate returns. Those start-ups understand their customers, define the problem clearly and have proof that their solution, marketing and pricing work.
“We don’t raise money to build our product. We raise to finish our product. We don’t raise to find our market. We raise to own our market. We don’t raise to develop our sales process. We raise to repeat our sales process over and over again.”
—— Frank Rimalovski, Executive Director of Leslie eLab
So when should founders raise venture capital?
A helpful rule of thumb: raise only when you have evidence that the business can grow faster with additional resources.
What counts as evidence varies by sector:
- Enterprise software: sales + utilization + organic growth within enterprises
- Consumer products: economically viable customer acquisition
Across industries, it’s worth taking the time to distinguish early excitement from true traction. For example, it’s hard to tell from 1000 sign-ups on a mailing list how many convert into paying customers. By comparison, 100 confirmed sales and a verified 1,000-person waitlist tell a clearer story about genuine market interest.
Another way to gauge timing is to talk to investors directly. Ask them about the last five companies in your sector they invested in — and what level of traction those teams had at the time. A simple “I’m a student trying to learn” opens more doors than you’d expect.
So when should founders raise venture capital?
Many early-stage teams discover they don’t need as much capital as they initially expected. Data also suggests that premature scaling can put startups on a racetrack they may not be ready for. Once you accept investment, your company is expected to grow, improve, and hit milestones consistently. If progress stalls, raising a second round of venture capital becomes much harder.
So when should founders raise venture capital?
If you’re not ready for that kind of pressure just yet, there are plenty of supportive, non-dilutive options at NYU that allow you to experiment, learn and build traction:
- Startup Sprint and Summer Launchpad through the Leslie eLab, which offer grants and stipends with no equity taken.
- VentureWell E-Team Grants at NYU MakerSpace are designed for teams developing solutions to real societal challenges.
- Innovation Venture Fund, which invests in startups that aim to commercialize technologies developed by current NYU students, faculty, and researchers.
These pathways can give founders the breathing room they need to validate their ideas and grow on their own terms before deciding whether venture capital is the right next step.
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