The Million Dollar Question: How Much Should You Raise? + Fundraising Fieldnotes for 10.8.24

“How much are you raising?” It seems like the simplest question. It IS a simple question. But it’s also one that has a ton of wrong answers and one that founders mess up all the time.  

If you’re feeling some anxiety about how to answer this question and whether or not you’re on target, don’t worry. You’re not alone. Today I’ll cover the common questions founders face about fundraising amounts, explain why being goal-oriented is crucial, and lay out the two key goals for raising funds. Keep reading…

“How much money should I raise in this upcoming round for my company?” 

Figuring out how much to raise can get trickier as you grow. For later-stage companies, it's about syncing your funding needs with your growth plans and milestones. This means understanding your finances and market, and finding that sweet spot between ambitious goals and what you actually need to reach them.

“How much should I raise?” is a common question I get from tons of founders, and it pops up in various forms and at different stages. No matter if you’re a pre-seed company or a Series B company, my approach is pretty consistent: it’s all about being goal-oriented. But before getting into that, let’s unpack why these questions arise in the first place.

At the earliest stages, founders are often confused about fundraising. They’re pulled in various directions with advice from all over, which can lead them to consider both smaller and larger amounts. On the smaller end, imposter syndrome is usually the culprit, making them doubt their worthiness to ask for thousands or even millions of dollars. On the larger end, some expert’s voice is usually whispering, “A future unicorn would raise more!”

It can feel completely overwhelming, and both ends of the spectrum are uncomfortable. Even generic advice like "raise enough to cover 18 months," is easier to understand and often lacks concrete guidance on how to determine that exact amount. What’s a founder to do…

Breaking Down the Numbers

Let’s walk through a more measured approach to finding your number. While people throw around round numbers like $1.5 million or $750,000, there’s a more scientific way to do it beyond just copying the number you heard the last company raised. And here’s the key: focus on milestones. Determining your raise amount starts with calculating how much money it’ll take to hit that next major milestone. 

But what should that milestone be? Luckily, this one is a bit easier. For a venture-backed company, there really are only two possible goals:

1. Getting to break-even

2. Achieve an amount of progress that will enable you to secure the next round of capital.

Avoiding the “Bridge to Nowhere” Trap

If you’re early on in your journey, the 2nd goal is the one you should be focused on. How much money do I need to drive progress that fuels a compelling story to the next set of investors?  

When faced with the discomfort of asking for what seems like a massive amount of money, say $1M, inexperienced founders can lose sight of that question. They may retreat and turn their fundraise into something that feels less daunting, like $100k. To them, it might feel more reasonable. “Maybe I could convince a handful of people to give me $25k each?”.

While this might seem more manageable, it’s not the right approach. What will you be able to do with $100k? Could you do enough to convince another set of investors to invest, or would it just be enough to build half of a product…  

No investor wants to fund a round that leads to minimal progress or a dead end.

These words have always stuck with me because they’re so right. No one wants to give money to someone who’s just going to build a bridge to nowhere. Even though raising a smaller amount might seem easier, remember: if this amount only gets you started and lets you write a few lines of code, how will you raise more money once you’ve used up that capital?

This is where planning for the story you’ll present to future investors becomes crucial. You need to outline a clear plan: identify key milestones you’ll need to reach after THIS round that will allow you to raise capital, work backward to determine how you’ll reach those goals, and then calculate the necessary capital to execute. That’s how you should be determining how much money you need to raise today.

You can apply this framework to your very first friends and family round, your pre-seed round, all the way through Series C and beyond. 

So... how much money should you raise? Well, you'll figure it out once you nail down those milestones. 

Make sense? Let me know if you have follow-up questions… and don’t be shy!

Be chased,
Jason

This gets rehashed 100 times a year by different VCs. It's not unique. But it's true and something you have to understand as a founder as well as an investor.

Gosh, this is incredibly important to understand in fundraising. I have so many stories that illustrate this. Be someone people want to be around…

You just gotta be honest … 🫠 

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