It is well worth reading the article written by Matt Marshall of Venturebeat on the best time to raise Venture Capital (VC) funding. The article uses recent completion of $11m equity funding round by FreeWebs as a case study.
The argument is that the ideal time for Series A or first round of VC funding is right before the company’s rising "adoption" curve meets the declining "risk" curve. The second graph makes this point clearer.
However in this model, VC funding is used to achieve step changes from "seed" to "expansion". In the case of FreeWebs, they have held off until the model is refined and proven, and the company has achieved profitability. This leads to less dilution of founders equity and at the same time, makes it easier to raise funding.
Third graph is taken from Catalyst Venture Partners, which show how a company’s valuation changes as it emerges from seed to expansion and beyond.
ebdex is now 22 months old. Our key challenges are getting those vital early customers, building the management team and raising the VC funding necessary to support above and achieve the 3 year strategic business plan.