How Much Funding To Raise

When raising funding consider how much you should raise.

Start with the overall amount of funding required to take the business to cash flow positive.

This is often a fairly large number for platform-based businesses in a high-growth sector.

Take the overall amount of funding and break it down into milestone raises.

At the early stage of the business, the valuation is low.  

As you build the team, the product, and the revenue your valuation will go up.

For the first round of funding raise as little as you need to reach the next milestone.

If you raise too much funding in the first round you will be giving away too much equity.

Save the larger rounds of funding for later when you have a much higher valuation.

Pre-seed rounds are often at $250K, Seed rounds at $500K to $750K, and Series A rounds at $1M to $5M.

Each round will cost you 20% of the equity.

Be careful in setting valuations too high in the first round as you’ll need to at least double that valuation in the next round.

 

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.

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Thank you for joining your host Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.

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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.