4 Risks of Too Much Money Too Soon

Raising funds is a great accomplishment for any inventor, but it can be taken too far. Like all elements of life, too much of a good thing is a bad thing.

1. It Will Keep You From Running Lean

When you start out inventing, you have to be very creative to get your company off the ground. Over time, as you start raising more money, it can be much harder to keep that lean mindset from the start. Sure, you need capital to speed up the growth of your business, but raising too much too soon can increase the funds you waste. Instead, raise capital and force yourself to be stingy throughout the inventing process.

2. There is a Time Frame for ROI

Typically, venture funds are structured as 10 year commitments, which means investors expect a return on their investment in that time frame. The earlier you raise money, the earlier the clock starts ticking.

3. Money Creates a False Sense of Security

Many inventors use a formula that divides their money by their monthly expenses to see the number of months they can survive (also called the runway). However, it’s not always a valid way to look at things. First, expenses will always rise, which means the number of months decreases. Second, products can be late which means already-counted on revenue doesn’t materialize. This means the runway isn’t extended like counted on, and it can cause an uncomfortably tight squeeze.

4. You Depend on “Experts”

When an investor has money coming in, they begin to look for “world-class” experts and vendors who might not be all they’re cracked up to be. If an investor doesn’t have the cash, they need to look for more creative ways to get results rather than relying on consultants and agencies charging big bucks for their advice.

At Alotech, we partner with you to find creative ways to work within your budget. If you’re interested in spending your capital wisely, give Alotech a call! Because we work with inventors with a range of products and needs, we have the resources and knowledge to help you budget successfully. Contact us today by calling 919-842-3599, or visit our contact page and fill out the form.