Hi there and welcome to the Everyday Entrepreneur podcast where I, Caitlin Fritz help you reach your entrepreneurial potential. Together we can build your dream social impact business so that you can leave a legacy beyond your nine-to-five. Hello, hello, and welcome to this week's episode of Everyday Entrepreneurship. I'm your host, Caitlin Fritz, a Forbes recognized entrepreneur, award winning business mentor and coach who supported over 950 founders to build, grow, and scale their impact led businesses. And I'm excited to bring you a kind of thought provoking topic today because it's a question I get asked all the time. When? Do I need money? Yes, we are going to be talking about the moolah today. Now, I am going to be kind of walking you through a framework and a conversation about when I think capital is needed. Obviously, everyone's business is different. I'm more than happy to have a one to one chat. So, you know, just reach out if you want to talk about your business needs, but I'm going to be using some broad brushstrokes on when I think businesses and trends I see in businesses at kind of the strategic times when a cash injec I'm going to be talking about trends I see in businesses on when I see, on average, a cash injection being necessary for a business, and I'm also going to share some bonuses, which is, well, I'll just leave it to the end, don't worry. I'm also going to share some bonuses at the end on when I think you don't need money, because that's also really, really important. So first off, I want to set the stage. When I think the whole startup bubble started, it was very much, you had an idea, you got together a great team, you got money. Then you started building. Obviously, there's the dorm room stories, the bootstrap stories, but I want to say more and more and more, you need to have some legs on your business before you ask for money. Okay? The world of capital, um, has gotten a little bit tighter, given politics, COVID, everything in between. Uh, so there's higher expectations put on founders and teams for the readiness of their business. So let's break down kind of the four areas when I think you probably need some money in your business. So the first is if your business model and business is very capital intensive. Capital intensive means. Something different to everyone, but how I am using the term capital intensive is when there are very significant upfront costs in terms of infrastructure, in terms of technology, or in terms of research. So let's just paint the picture of what these look like in three different. Realms of business. So the first off is if you have a capital intensive business in terms of infrastructure. A lot of my energy friends, my green tech entrepreneurs who are doing very sophisticated, um, work probably do not have the amount of capital it takes to really leverage carbon capture. Or to build out a new version of wind harnessing technology. Okay, those are capital intensive expenditures. You probably need to raise investment or get a cash injection. The second, um, is technology and research heavy companies. So I have been working a lot with cancer tech founders, founders who are developing really impactful, uh, technology in the medicine, healthcare, femtech spaces. To really make an impact in those spaces, there's a lot of regulation. And often times there's a lot of R& D before it, It's even safe for people. You will probably need a capital investment. And the last is if you are running a business that is, has very high kind of overhead infrastructure costs as well. So for example, if you are doing something in. A brick and mortar space, i. e. restaurant, daycare, oftentimes there will be upfront costs to that because you have the higher overheads to manage. So if you are in a capital intensive business model or industry, you will probably need a cash injection. The second kind of trend I see when you're needing and ready for capital and investment is cash injection to scale. So these are my individuals and my founders and businesses who have proven They have peaked market interest. They usually have a prototype or an early stage product or service. They have, I would say, returning traction. I. e., I'm going to use an example with an edtech startup. This edtech founder, they have 2, 000 users organically. They're getting more and more users every single month organically. They could penetrate the market faster and more efficiently through a cash injection in marketing. That is a very valid reason and scenario in which raising investment makes sense. Because you've proven your traction, and you realize you can snowball this traction with money. Because there are some problems that money can solve, and this is one of them. So, when you have those, those green flags of traction, early pro, um, early product market fit, returning customers, monthly recurring revenue, these are kind of signals that with a cash injection, you can probably either scale or. rapidly adopt in the market. So that's reason number two and trend number two. I see when to raise investment. Number three is key hires at key times. So businesses go through, I don't want to say metamorphosis. per se, but usually there's the founding team, then there's kind of that early stage team, then as you mature, you will probably need different skill sets and industry expertise. So for example, if I'm using the case with EdTech, that EdTech founder I was talking to, they're going to be getting a cash injection. But they also need to hire someone who really understands education procurement. They're techies at heart. They're, I mean, there's techies and teachers on their team. Let's be real. So they understand education. They understand the technology. They understand the impact this is having when it comes to youth. But. They don't know the UK or the US buying cycles. They don't know how to get their product in front of big conferences, big players in European markets, Asian markets, and they don't know how to, you know, operationalize a team of, say, under 10 to a team of double that. They're going to need talent within the sales. procurement, and operation spaces, and to attract that talent, you will probably need to offer them a decent salary and package, um, so that they will work in a startup environment, but if they get these people in their team, imagine the impact they can have within their business, within their reach, and within their impact. That's a really community. Another good reason when a cash injection, I would say, is almost necessary. It's even better when you have these people lined up, by the way. So, before you even get money, start talking to the right people. And the fourth trend I see why and when people need money in their business. is when they are at a growth stage. So similar conversation with the key hires, you're going to go through iterations of your business, of your product. Hopefully you have a minimum, minimum, really scrappy viable product. Then you're going to go to a prototype. Then you're going to go to early stage product or service. And then, especially for my product people, having that on the shelf ready product that you can put next to major brands. So, for example, I was working with a founder in the diverse beauty space. She recognized she had an amazing product. It worked. It was scrappy, but to get to the ability of having your product in major pharmacies, retailers, department stores, you need to have a sophistication in terms of brand and manufacturing that she didn't have yet. But, she had all the proof points and interest and community around her product that the moment it reached that quote unquote shelf ready appeal, people were going to buy it. That is a positive sign that if you utilize a cash injection correctly, uh, you'll be able to really monopolize on this growth stage of your business. So, those are the reasons and times that And trends, when people ask me, when do I need money, I will, I will tell them capital intensive businesses, cash injections for scale, key hires at key times, and really strategic growth stages. Those are kind of the four big buckets. I see when founders will need money. And I use the term cash injection and money. loosely, okay? Because sometimes people take this as equity investment. There's also incredible grant opportunities, competition opportunities. There's also alternative finance, debt financing, loans. So every business looks different. For example, my capital intensive friends, there's some really awesome grants that will really make a huge impact on your business without giving away any equity. For my growth stage people, maybe you do take a more traditional debt financing or equity financing route, okay? So that's why I'm using the term money. A little bit loosely here. Now I did mention, uh, I wanted to share when you probably don't need money. And I'm gonna say, nine times out of ten, you do not need money for your first minimum, minimum viable product. You are able to gauge interest by low cost or no cost. I've talked about this in previous episodes, but landing pages, mock ups, renders, videos, uh, customer surveys, all of these things, you can start to show if you're on the right track without a huge capital investment. And even for my, um, People who fall into bucket number one, capital intensive, I had someone prove that they're really awesome algae could be used for carbon capture in a petri dish. So. Think small, think attainable, think low or no cost when it comes to that very early. I call it a minimum, minimum viable product because I feel like MVP, people have set the standard way too high already. So think minimum, minimum viable product, low or no cost ways. So that's my little bonus as an area where I think you don't need money. Um, I'm not saying it's fun. I'm not saying your MMVP will be the prettiest thing. But you'll know if you're on the right track without Losing space on your cap table or having to basically have the full time job of figuring out where you're going to get the funding from. So I made a cute little flowchart in the Everyday Entrepreneurship LinkedIn newsletter that kind of walks through this as well. So do take a look. I'd love to hear from you. When do you think you need money in your business and when do you think it's time? Just skip over that. When do you think it's absolutely not necessary? I love hearing real world examples. Um, so do drop me a message, drop me a line, um, and if you have any funding stories, you know, I would love to hear them and interview you on the pod. So that's it for this week's episode of Everyday Entrepreneurship. I hope to see you again next week, and if you enjoyed this or want to join in the conversation, you know, follow me, subscribe, uh, and don't hesitate to reach out if you have your own finance questions. I love talking to founders day in and day out, so all of that will be in the show notes. So until next time, guys, this has been Everyday Entrepreneurship. Thank you for joining me for this episode of Everyday Entrepreneurship. To stay tuned and most up-to-date, subscribe wherever you listen to podcasts. You can follow me Caitlin Fritz on Instagram. And if you have any questions about building your business with Impact, drop me an email with the link in the show notes.