TL;DR: Sufficient to hit the milestones to lift your subsequent spherical of funding
The correct quantity of cash to lift in your startup is “as a lot as it’s essential hit the milestones to lift your subsequent spherical 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 numerous misconceptions about how you determine how a lot it’s essential increase.
To be a startup on the VC treadmill is a staged de-risking of a enterprise proposition. In different phrases: Proper now, your organization could be very dangerous certainly as a result of sure elements of your corporation are unknown. For this reason it’s essential put collectively a minimal viable product (which is neither minimum, nor viable, or a product) to check out a part of your corporation mannequin. As soon as these issues are examined and confirmed, the chance of the enterprise goes down, and you may increase your subsequent spherical of funding to tackle the following a part of the journey.
The primary mistake numerous founders make is to attempt to increase sufficient cash for a certain quantity of runway, measured in months or years. That makes some sense, however traders aren’t serious about conserving your startup afloat for the following 18 or 24 months. They’re serious about conserving you alive for lengthy sufficient to ship sure milestones, which in flip are a proxy of threat discount.
Let’s take a deep dive into how one can greatest design your startup’s journey by way of the assorted levels of funding — and element simply how a lot it’s essential increase at every stage.
One of the simplest ways to consider how a lot it’s essential increase for this spherical is to contemplate what it’s essential accomplish to lift your subsequent spherical. Meaning contemplating the particular milestones that you need to hit to show that your organization is transferring in the best route. These milestones would possibly embody: