Milestone the Raise

Founders often want to compress their fundraising into one round for the sake of efficiency.

While this may sound like a good idea, it’s actually an expensive one for the founder.

Raising too much money in the early stages will cost the founder equity dilution.

The valuation of the startup is low at the beginning and will rise with more products built and revenue generated.

Raise a small amount upfront to get the business going such as $250K.

If you try to raise less than $250K most angels and venture capitalists will not consider this enough to build something meaningful.

Take your overall fundraising and break it into smaller milestones such as $500K for a seed round.

It’s often the case that you will need to raise another $500K a year later which some call a seed plus round.  It’s still seed funding and comes at the same terms as before.

But it’s easier to raise because you broke a $1M raise into two milestones.

This strategy lets you raise funding and then work on the business.

For the next round, you’ll need some time to build the product and close customers.

A rule of thumb is it takes one year to raise $1M. 

A $500K raise will come in closer to half a year.

When you raise funding it should be a full-time job. 

The key here is it doesn’t have to be a full-time job for the entire year.

 

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.