In startup fundraising, many founders try to raise too much funding in the first round.

This causes dilution for the founder as the valuation will be low. 

In startup fundraising, the first raise is a minimum round.

Instead of raising everything you need to accomplish the goals, you should raise a minimal amount to get the initial product up and some revenue coming in.

The startup’s valuation will be at the lowest point in the life of the business so it’s best to raise the smallest amount possible.

As the startup builds more products, teams, and revenue the valuation will rise.

The majority of the funding comes later when the valuation is higher.

This strategy reduces the founder’s dilution.

In structuring your fundraiser consider what can be done to generate the biggest bang for the buck with the least amount of funding.

Then add more capabilities to the product and more team members.

By tranching out the product features one can reduce the funding requirements.

 

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.