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Dear Allison,

I have a really awesome idea for a tech startup. How do I know if I am ready to raise money from investors?

Startup Sensation Waiting to Happen

Dear Startup Sensation,

The fact you are asking this question means you are most likely not ready to raise money. A lot of people have really awesome ideas. Only very few are actually able to make them happen. Even fewer yet are able to turn them into profitable businesses that provide solid returns to investors.

Because of these odds, unless you have an incredible track record, there are very few investors (besides maybe your Mom), who will invest in you before you have proven your concept and taken very tangible steps toward making your idea a reality.

At Fresco Capital, as early stage and seed stage investors, we are some of the earliest investors you would potentially have on your team. However, before we make an investment, we always want to see objective validation that your product works, your users love it, and you have customers that will pay for it. In technical terms, we call this product/market fit, evidence of customer love, and recurring revenue.

Once you have proof of concept and some real traction in the market, you should start considering raising a seed round from investors who understand your vision, your mission, and your culture.  If you’re one of the few people out there who has done a good job of executing your awesome idea, there will surely be quite a few people interested in investing in you.  At that point, taking money can be tempting, but remember that your first investors are essential members of your team — you must choose them wisely!