A typical funding round process for your startup may seem to be an endless repeating cycle of securing cash and capital from investors every 12 to 18 months to finance and run your company for another 12 to 18 months. It can be stressful and draining as you spend a lot of effort, time, and resources on the demand, lawyer fees and the constant back-and-forth negotiations to secure the funds, so much so that you might be discouraged from having funding rounds for your startup more frequently.
What’s more, some startup founders and teams are beginning to suspect whether this particular type of funding round is actually necessary at all for their companies. As a newly formed startup it is probably the case that the new company does not require vast sums of money, but when it comes to fundraising somehow it seems like they need to exaggerate the amount of funds and capital they need in order to get investors’ attention. Does your startup really need US$5 million today right now? It’s more likely that you just need several thousand US dollars to rent out space or to hire new talent.
Additionally, your startup is basically giving up a lot more equity than it has to to investors because your startup is raising significantly larger amounts at the current lower valuation. By comparison, if your startup manages to raise a much more modest amount of funds, perhaps a sufficient amount for your company to run and operate smoothly for the following 6 months as opposed to a much higher amount to run for the next year and a half, this will enable you to get the leverage to go for a higher valuation when raising funds again later.
Certain startups have caught on and are already moving away from the current funding round cycle – which is denoted by a ‘go big or go home’ mentality – to a model that’s more about staying nimble and flexible and powered by funding automation technology, called ‘agile funding’ by some. With funding automation technology, certain important aspects of the funding process such as the paperwork and documents associated with agreements and terms, can be generated much more quickly and efficiently, and can be done remotely and dynamically to boot.
Another big draw for ‘agile funding’ is that startup founders can now choose to raise capital whenever an opportunity presents itself. A major issue with the traditional funding round model is that startups’ access to potential investors are limited to whenever a funding round is underway, meaning that they have to turn away potential investors when there are no funding rounds currently happening. However, funding automation technology enables startup founders and investors to set their investment plans into motion whenever it is convenient for them to do so, without having to adhere to the cyclical nature that is the characteristic of the ‘go big or go home’ formal funding round cycle. This is possible with funding automation technology’s dynamic funding tools, which enable startups to raise funds and capital outside of the traditional, formal funding rounds. What’s more, the tools also enable startups to do fundraising without the need for the formal funding rounds at all if they so wish.
True to its name of ‘agile funding’, startup founders are now able to raise smaller amounts of money on a more on-demand, more frequent basis. Now founders have the flexibility and choice of raising funds on a continuous, opportunistic basis instead of just relying on a cyclical funding round model that also eats up a significant portion of their time and resources.
With the latest developments and advancements in funding automation technology, the ‘agile funding’ model is a real viable choice for startups to use to raise money and funds. With the rise of the ‘agile funding’ model, startups now have much more control and choice over how they want to raise their funds, and when to raise it.