Does your startup have enough runway? 5 factors to consider

When starting any new business, one of the first questions you need to answer is whether you have enough runway to survive the first couple of years of operation. A lot of things need to be considered while starting a corporate business. These includes:

How much runway do you have?

Startups in the seed or Series A stage will want to leave between 12 to 18 months of runway. Make sure that they’ve put enough money towards either product development or growing their revenues so that they have time to build themselves up to more so that they make significant progress.

Typically, things don’t work out as planned.

Month by month, perform reality checks to identify challenges or opportunities that may impact your operational performance. Find out if revenues are coming in on time, your key suppliers can produce products at the needed volume, or if a certain project is still in process and on track.

Fundraising is rarely quick.

Some fundraising projects may take longer than you’d prefer, as investors and investment groups have a complicated decision-making process involving steps like vetting ideas, short-listing proposals, performing intensive analyses, and going through approvals. Secure investors, it takes three to five months, and they may decide not to fund the company.

Transparency isn’t optional.

While it’s hard to relay bad information about your business to shareholders and investors, It’s vitally important to make sure that you are transparent. Investors do their homework and find out the truth. If you’re not honest, you could be harming your reputation, and funding prospects will diminish because investors speak.

One should never assume that money is secure before securing it.

Remember: Fundraising isn’t over until you receive and sign the contracts and make sure all of the money has been deposited and is available to you.

Giving verbal commitments is a good first step. Once this is done, investors will examine and accept an investment agreement, outlining the terms and wiring money to your company’s bank account.

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