How Much Money Should Entrepreneurs Really Raise?There are two theories: raising a lot and raising just enough to get by. Both have their advantages and setbacks.
ByRose Leadem•
Opinions expressed by Entrepreneur contributors are their own.
Editor's Note: In the new podcastMasters of Scale, LinkedIn co-founder and Greylock Partners Reid Hoffman explores his philosophy on how to scale a business -- and atEntrepreneur.com, entrepreneurs are responding with their own ideas and experiences inour hub.This week, we're discussing Hoffman's theory:you need to raise more money than you think you need -- and potentially a lot more.
When it comes to raising capital, there are two schools of thought: raise as much as you can and raise only as much as you need.
Related:To Grow Your Business, You Need to Handcraft Your Experience With Early Customers
Each has its advantages and drawbacks, and many debate on which is better: having money to grow quickly or giving up control. But for Reid Hoffman, co-founder of LinkedIn and Greylock Partner, cash trumps dilution.
"You'll need capital for all the unknown pivots, whether it's new customers needs or competitive attacks," he says in the second podcast episode forMasters of Scale,in which he chats with Mariam Nacify, the founder of online stationery site Minted, about the need for entrepreneurs to raise as much money as they can for these unforeseen challenges.
But not everyone is on board with this theory.
"I absolutely disagree with Reid Hoffman," serial entrepreneur Patrick Bet-David and host ofValuetainmentsays in a video about the philosophy to raise more money than you think. "I think absolute statements have problems, especially in the world of businesses, because there are so many different ways to start a business and grow," he adds.
Related:LinkedIn's Reid Hoffman: To Scale, Do Things That Don't Scale
Rather, Bet-David thinks entrepreneurs should raise a little, prove your concept and develop a strong reputation before asking for a big investment from a VC.
Check out the video to hear more about Hoffman's theory, why not all companies need to raise a ton of money and the reason most businesses should compare themselves to Silicon Valley startups.
