TL;DR: Enough to hit the milestones to boost your subsequent spherical of funding
The right amount of cash to boost to 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 but, the overwhelming majority of founders I speak to are very fuzzy about precisely how a lot cash that’s, and there are a number of misconceptions about how you determine how a lot you should elevate.
To be a startup on the VC treadmill is a staged de-risking of a enterprise proposition. In different phrases: Right now, your organization may be very dangerous certainly as a result of sure elements of your online business are unknown. This is why you should put collectively a minimal viable product (which is neither minimal, nor viable, or a product) to check out a part of your online business mannequin. Once these issues are examined and confirmed, the danger of the enterprise goes down, and you may elevate your subsequent spherical of funding to tackle the subsequent a part of the journey.
The first mistake a number of founders make is to attempt to elevate sufficient cash for a certain quantity of runway, measured in months or years. That makes some sense, however traders usually are not fascinated about protecting your startup afloat for the subsequent 18 or 24 months. They’re fascinated about protecting you alive for lengthy sufficient to ship sure milestones, which in flip are a proxy of danger discount.
Let’s take a deep dive into how one can greatest design your startup’s journey by the assorted levels of funding — and element simply how a lot you should elevate at every stage.
Milestone-driven fundraising
The greatest method to consider how a lot you should elevate for this spherical is to contemplate what you should accomplish to boost your subsequent spherical. That means contemplating the particular milestones that you have to hit to show that your organization is transferring in the proper route. These milestones may embody: