When I see a company raising $50k, $100k, or even $250k, I scroll right past them. It’s just not enough money to get to the next level. So how much money should you raise, and why?
How Much Should I Raise?
You want to raise enough money for you to grow substantially, ideally 3x year over year. And you want at least 18 months runway after your raise closes.
For a pre-seed startup, this usually amounts to $500,000 to $2 million. The post-money valuation would be around $5-8 million.
For a seed stage company, you want to raise about $1-4 million. The post-money valuation would be around $8-12 million.
You wouldn’t believe how far from this a lot of founders are. Just yesterday, I saw a company raising only $25,000!
The founders who do this probably aren’t American. They don’t know what you’re expected to raise here, and they don’t know how much capital is available.
Let me put it plainly: Americans have money coming out of their ears. Don’t be afraid to grab some.
Why You Should Raise a Larger Round
“But Francis, why do I need that much money?”
Keep in mind, your competitors will be raising millions. They will hire top engineers and salespeople and take your customers from you.
Without capital, you’re defenseless.
Also, startups have a way of running out of money.
If you’re only raising a few small checks, that becomes far more likely. But if you take down a couple million and keep the spending reasonable, you’re set for the next few years.
A big part of success is just staying alive.
Wrap-Up
Don’t play small ball. Raise a significant round. That will let you hire the best people and attack the market.
Raising more capital also shows investors that you’re serious about this business.
You’re not just grabbing $25,000 to survive until tomorrow. You’re on your way to becoming a giant.
How much do you think startups should raise?
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