4.4 C
New York
Wednesday, February 8, 2023

How much money should you raise for your startup? • TechCrunch


TL;DR: Enough to hit the milestones to raise your next round of funding

The correct amount of money to raise for your startup is “as much as you need to hit the milestones to raise your next round of funding.” It isn’t rocket science, and yet, the vast majority of founders I talk to are very fuzzy about exactly how much money that is, and there are a lot of misconceptions about how you figure out how much you need to raise.

To be a startup on the VC treadmill is a staged de-risking of a business proposition. In other words: Right now, your company is very risky indeed because certain parts of your business are unknown. This is why you need to put together a minimum viable product (which is neither minimum, nor viable, or a product) to test out part of your business model. Once those things are tested and proven, the risk of the business goes down, and you can raise your next round of funding to take on the next part of the journey.

The first mistake a lot of founders make is to try to raise enough money for a certain amount of runway, measured in months or years. That makes some sense, but investors are not interested in keeping your startup afloat for the next 18 or 24 months. They’re interested in keeping you alive for long enough to deliver certain milestones, which in turn are a proxy of risk reduction.

Let’s take a deep dive into how you can best design your startup’s journey through the various stages of funding — and detail just how much you need to raise at each stage.

Milestone-driven fundraising

The best way to think about how much you need to raise for this round is to consider what you need to accomplish to raise your next round. That means considering the specific milestones that you must hit to prove that your company is moving in the right direction. These milestones might include:

Related Articles

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Latest Articles