There is a default story about startups, and it goes like this.
You have an idea. You build a small version. You raise a seed round. You raise a Series A. You hire fast, grow fast, raise again. Then one day you sell the company or go public, and everyone celebrates.
The story is so common that many first-time founders think raising money is the job. The pitch deck comes before the product. The first question at a meetup is “Have you raised yet?” The tech news counts funding rounds like football scores, as if the company that raised the most is the one that’s winning.
But raising is not the goal. It is a tool. Like every tool, it is perfect for some jobs and dangerous for others. A hammer is great for nails and terrible for windows.
This is my attempt to think clearly about when a small startup should take outside money, and when it is better to stay independent. I don’t have a final answer. It’s one of the open questions on my Now page, and I’m working through it with Santara right now. Writing it down is how I think.
What my first teacher told me
My first business teacher, William Skelley, gave me the most important sentence I know about fundraising:
Once you take investors’ money, you work for them.
I didn’t believe it at first. The founder is the boss, right? You had the idea. You built the thing. You stayed up at night fixing it.
William explained it with two stories.
Adam Neumann built WeWork from one shared office into one of the most valuable startups in the world. When WeWork tried to go public in 2019 and people finally read the numbers, the investors pushed him out of the company he had created.
Travis Kalanick built Uber into a global giant. In 2017, after a string of scandals, a group of major investors demanded that he resign. He did.
In both cases the founder was removed by the people who had paid for the company. Their names were on the idea, the brand, the story. It didn’t matter. The board decided.
His point was not “investors are bad.” Most investors are honest people trying to back good companies. His point was that money comes with a duty. When you take someone’s money, you owe them:
- the truth, especially when it’s bad news;
- a real effort to give the money back, and more;
- a voice in the big decisions, because part of the company is now theirs.
Founders who forget that duty, who start treating the company as if it belongs only to them, eventually lose it.
The lesson he learned himself
William’s own story made the lesson sharper than any textbook.
iFunding, the real estate crowdfunding company he co-founded in New York in 2012, ended in a civil case brought by the U.S. Securities and Exchange Commission about how investors’ money was used and what investors were told. I’ve told that story in full, including both sides, in my post about him, so I won’t repeat it all here.
What matters for this essay is what he took from it. He writes about it openly now as a warning to other founders, and he sums it up in one line:
“If you sign it, you own it — every word.” — William Skelley
The lesson I took is simple: investors’ money is never free money. It isn’t a reward for a good pitch. It is someone else’s savings, someone else’s fund, someone else’s trust, sitting in your bank account. Treat it like a prize and it will cost you more than you raised.
So before asking “How do I raise?”, I’ve learned to ask a different question first: “Should I?”
Not all money is the same
When people say “raising money,” they usually mean venture capital. But that’s only one kind, and it’s the most demanding kind. Before choosing, it helps to see the whole menu.
Customers. The best money in the world. It comes with no shares, no board seats and no deadline. Every dollar a customer pays is also proof that you built something useful. Some companies grow for years on this alone. Some get customers to prepay, for a year upfront or a deposit on a future product, and use that cash to build.
Your own savings, or a side income. Slow and personal, but you keep everything. Many founders run the first version of a company while consulting, freelancing or keeping a part-time job.
Friends and family. Easy to get, hard to live with. The terms are gentle, but if things go badly you’ll see the loss at every family dinner. Only take it from people who could truly afford to lose it, and put it in writing like any other deal.
Angel investors. Individuals investing their own money, often former founders. Usually smaller checks, lighter terms, and sometimes great advice. Quality varies a lot from one angel to the next.
Venture capital. Professional funds investing other people’s money, looking for companies that can grow very, very large. Big checks, real help in the best cases, and the strongest pressure to grow fast. More on that below.
Grants, competitions and accelerators. Some give money without taking shares, some take a small share in exchange for money plus a program. Worth checking, especially early, but rarely enough to build a company on.
Loans and revenue-based financing. You borrow money and pay it back, sometimes as a percentage of monthly revenue. You keep your ownership, but you need steady income to make the payments.
Each of these comes with a different set of strings. The question isn’t just “raise or don’t raise.” It’s which strings you’re willing to carry.
What money actually buys you
Let’s be fair to fundraising. Outside money, especially a lot of it, can buy real things.
Speed. You can hire five engineers now instead of one engineer a year from now. You can run the marketing experiment this month instead of next year.
Focus. You can stop doing side work and give one product your whole attention. For many founders, this alone changes everything.
A shot at a winner-takes-most market. In some markets, the company that grows fastest wins almost everything. Think of ride-hailing, social networks or marketplaces, where each new user makes the product better for every other user. In those markets, being second and profitable may mean being nothing at all.
Help. Good investors have seen dozens of companies before yours. They know which mistakes are common, who to hire, which customers to call. A single introduction from the right person can be worth months of cold emails.
Credibility. Some big customers, partners and future hires feel safer when a known investor is behind you. Fair or not, it opens doors.
A cushion. Money in the bank lets you survive a bad quarter, a lost customer or a product that takes longer to build than you hoped. And it always takes longer than you hoped.
These are real. For the right business, they are the difference between winning and being left behind. I don’t want this essay to sound like fundraising is always a mistake. It isn’t.
What money costs you
The price of outside money is not just a percentage of your company. It’s paid in other ways too, and some of them only show up years later.
Ownership
Every round makes your share smaller. This is called dilution, and it adds up faster than most founders expect.
Here’s a simple example. Two co-founders start with 50% each. They raise a seed round and give 20% of the company to investors. Now each founder owns 40%. They set aside 10% for future employees. Now they each own about 36%. Then a Series A takes another 20%. Each founder is now under 29%. One or two more rounds, and the founders together may own less than a third of the company they started.
That’s fine if the company grows enormously. A small slice of a very large company can be worth much more than all of a small one. It hurts badly if the company doesn’t grow that much, because then you own a small slice of a small company, and other people decide its future.
Control
Investors often get board seats and the right to veto big decisions, like selling the company, raising more money or changing what kind of shares exist. The board can hire and fire the CEO, and that includes you.
This is exactly the kind of fine print I covered in Read Every Word You Sign. Most founders don’t lose control in one dramatic moment. They lose it one clause at a time, in documents they skimmed.
Pressure to grow fast
This one is the least understood, so it’s worth explaining.
A venture fund invests in many companies, knowing most of them will fail or return little. To make the fund work, a few companies have to return enormous amounts, often ten times the money or more. So a venture investor isn’t looking for “a good business.” They’re looking for a company that could become very, very big.
That means a company that grows 20% a year and makes a healthy profit may be a wonderful business for its founders and employees, and still be a disappointment to a venture fund. Once you take that kind of money, you’re expected to chase that kind of growth. Sometimes that means hiring before you’re ready, spending before it’s proven, and taking risks you wouldn’t take with your own money.
A fixed ending
Investors need their money back someday, usually when the company is sold or listed on a stock market. “Run this nicely for thirty years and pay ourselves a good salary” is rarely an option once you’ve raised. The clock starts the day the money arrives.
Distraction
Raising a round can take three to six months of meetings, follow-ups, documents and waiting. Those are months the founder doesn’t spend with customers or on the product. For a team of two or three people, that’s a huge cost that never appears in the term sheet.
Your relationship with the work
This one is personal. When it’s your money and your customers, a slow month is just a slow month. When it’s investors’ money, a slow month becomes a board update you dread writing. Some founders thrive under that pressure. Others find that the thing they loved building has turned into a thing they’re always explaining.
None of these costs is a reason to never raise. They are reasons to raise on purpose, knowing exactly what you’re paying.
Three good reasons to raise
1. The market rewards speed above everything. If a competitor with more money can take your customers in a year, and those customers won’t come back, waiting is risky. In these markets, slow and careful can mean slow and dead.
2. You already know what works and only need fuel. Customers are paying. They stay month after month. You know that each dollar spent on sales or marketing brings back more than a dollar. At this point, money doesn’t create the engine. It just makes a working engine run faster. This is the healthiest time to raise, because you’re raising from strength.
3. The product truly can’t exist without big upfront cost. Hardware, deep research, medicine, heavily regulated industries. Some things can’t be built on weekends and early revenue. If your first customer is two years and a few million dollars away, you need someone to pay for those two years.
Three bad reasons to raise
1. “Everyone else is raising.” Other founders’ rounds are not a business plan. You don’t know their terms, their pressure or how the story ends.
2. To find out whether people want the product. Money doesn’t answer that question. Customers do. Raising before you know just lets you be wrong faster and more expensively, and now with an audience.
3. For validation. A funding announcement feels like success. Your friends congratulate you. Your parents finally understand what you do. But it isn’t success. It’s a promise to investors that you now have to keep.
Signs it’s too early
You’re probably not ready to raise if:
- you can’t name ten real customers who would be upset if your product disappeared tomorrow;
- you can’t explain in one sentence what the money will buy and how it will come back;
- you haven’t read a term sheet and don’t know what a liquidation preference or a board seat really means for you;
- you’d be raising mainly because the bank account is low, and you haven’t tried charging more, charging earlier or cutting what isn’t working;
- you and your co-founders haven’t agreed on what you want the company to become. Investors will force that conversation. Better to have it first, alone.
None of these is permanent. They’re a list of things to fix first, and fixing them will make any future round easier and on better terms.
Independence is a real choice, not a failure
Somewhere along the way, “bootstrapped” started to sound like “couldn’t raise.” That’s wrong, and it pushes a lot of founders into deals they didn’t need.
Staying independent means growing from what your customers pay you. It’s slower. It’s often harder in the first year. But it also means:
- you only answer to your customers. Their problems decide your roadmap, not a board meeting.
- you can grow at a pace that doesn’t burn out your team, or yourself.
- you can choose a small, profitable business, even a boring one, and keep it for as long as you like.
- profit is the goal, not a someday problem. You learn early to charge properly and spend carefully. Those habits last.
- if you raise later, you do it from strength. A company that doesn’t need money gets much better terms than one that does.
Many of the businesses I admire most never took a venture round. They found a problem people would pay to make go away, solved it well, and kept the profits. They don’t make headlines. They make payroll, every month, for years.
I’ve seen this up close. Chợ Gem and HiTaVa are small businesses that run on what customers pay. Neither needs to become a giant to be worth running. If a month is slow, nobody calls an emergency meeting. We just look at what customers need and do better next month. That’s a kind of freedom that’s easy to underrate until you’ve had it.
There’s a middle path too
The choice isn’t always “huge venture round” or “never take a dollar.”
Some founders stay independent until the product clearly works, then raise once, on their own terms. Some raise a small round from a few angels they trust and never raise again. Some take a loan instead of selling shares. Some run a profitable business and use the profits to fund a second, riskier bet.
You can also change your mind. A company that starts bootstrapped can raise later. It’s much harder to go the other way: once investors own part of your company, “let’s just stay small and profitable” is no longer only your decision.
That’s the main reason I lean toward waiting. Staying independent keeps both doors open. Raising closes one of them.
If you do raise, protect yourself
If you decide that raising is right, a few rules have stuck with me, most of them from William.
Choose investors like you’d choose a co-founder. You might work with them for ten years. Talk to founders they’ve backed, especially the ones whose companies struggled. How investors behave in bad times tells you everything.
Raise what you need, plus a cushion, not the maximum anyone will give you. More money at a higher valuation sounds great, until you have to grow into that valuation.
Understand every clause before you sign. Valuation, liquidation preference, board seats, vesting, veto rights. If you don’t understand a word, ask, and pay a good lawyer to explain it. I wrote a whole guide on this because it matters so much.
Tell investors the truth, especially when it’s bad. A monthly update with honest numbers builds more trust than any pitch. The founders who get into real trouble are usually the ones who hid a small problem until it became a big one.
Keep the company’s money and your own completely separate. This sounds obvious. It’s also where some of the most painful stories in startups begin, including the one William now warns founders about.
Remember whose money it is. Every single day.
A simple way to decide
When I think about raising, I try to answer five questions honestly, ideally on paper.
1. What exactly would the money buy? People, time, marketing, equipment? Write the list. If the list is vague, the reason to raise is vague too.
2. What happens if we don’t raise? Does the company die, or does it just grow more slowly? These are very different answers. Slower is often fine.
3. Does this market punish slow growth? Will a better-funded competitor take the market for good, or will customers still be here, with the same problem, in two years?
4. Who would we be working for? Would I be glad to send these specific investors an honest update every month for the next ten years, including the bad months?
5. Do I understand every word of the deal? If not, I’m not ready to sign it. Not yet.
If the honest answers are “speed we really need,” “we’d lose the market,” “yes,” “yes” and “yes,” raise, and raise well. If not, stay independent a while longer and keep building. The money will still be there when you’re stronger. Usually on better terms.
Where Santara stands
For Santara, this isn’t theory. We’re a young company building AI that gives short-term rental hosts one clear briefing every morning, and we ask these questions all the time.
I’ll be honest about the pull in both directions. Building AI products that work reliably takes time and good people, and money would buy both. At the same time, I’ve watched what pressure from outside money can do to a company, and I know how much freedom there is in only answering to customers.
What I’m sure of is this. If we raise, it will be because the money buys something specific that our customers can’t pay for yet. We’ll choose investors we’d be glad to report to for a decade. We’ll read every word. And we’ll remember that the money belongs to the people who trusted us with it.
If we don’t raise, it won’t be because we couldn’t. It’ll be because we chose to grow the slow, steady way, one happy host at a time.
That’s what William taught me, with his words and with his story. Raising money isn’t a prize. It’s a promise. Only make it when you’re ready to keep it.
Related: My First Business Teacher: William Christopher Skelley, on why every founder ends up working for the investors, and Read Every Word You Sign: Term Sheets for First-Time Founders, a plain-language guide to the deal itself.
