In planning the fundraiser, the amount of funding is a key factor to determine.

The funding amount should take the company to the next major milestone.

It should give the company 18 months of runway at a minimum.

Investors expect the valuation to be around 3X to 4X that of the funds raised.

Most investors want 20% to 25% of equity for each major round of funding.

Therefore, the founder needs to see the valuation be at 3X to 4X the raise amount to account for the dilution.

Each deal will vary based on the following factors:

Growth rate of the sector — some sectors are growing faster than others and can command a higher valuation.

Location — some regions offer higher valuations than others.

Team — strong teams with a great track record will command higher valuations than first-time teams.

Traction — those with stronger traction can command higher valuations.

Use the 3 to 4x rule to set your valuation and fundraising goals.

 

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.