The short answer: When you need money to startup the right way, have exhausted all other funding options you feel comfortable with, and way before you get desperate.
1. When you need money to startup the right way
Sometimes we just can’t get a big thing done all by ourselves. I know that’s hard for you and me to swallow. Most startup people like us are strong enough to move mountains without help, but every now and then we find an opportunity where we need to move multiple mountains at the same time. It’s times like this where having a giant on your team comes in handy. Investors often make great giants.
2. When you have exhausted all other funding options
Other funding options like bank loans, credit cards, savings accounts, retirement accounts, home equity, borrowing from friends and brazenly robbing your 6 year old’s piggy bank. Shame on you… whatever. I’ve done it, too! But at some point we all run out of our own resources and need a little (or a lot) of extra cash to push the project forward.
3. Before you get desperate
I’ve mentioned this before. Desperation is never a good place from which to negotiate. When we get desperate we make dangerous decisions. If you think you may need to get a startup investor, start planning for that and building those relationships now. Even if you don’t end up needing an investor, those relationships will be well worth your time. When we build relationships we usually get good things in return. Build those potential startup investor relationships before it’s too late.
Bottom line: Getting startup investors is one of those things best done sooner rather than later. Imagine the feeling of having several giants ready to help you move mountains whenever you say you are ready for help. Invest in investor relationships now so you will have investors later.