How Much Should a Startup Raise? A Simple Rule for Sizing Your Round

Raise too little and you're fundraising again in a year, from a weaker position. Raise too much and you give away more of the company than you needed to. The right number comes from your plan, not from what friends raised.

Start from Months, Not Dollars

A round should buy enough time to reach the milestones that justify the next round, plus the time it takes to raise that round. For most seed and Series A companies that adds up to 18 to 24 months.

• About 12 to 18 months to hit the next milestone (revenue, customers, product).
• About 6 months to raise the next round while you still have cash.

Then Turn Months into Dollars

Add up what your plan spends over that window. The question is which spend:

• Through Series A, use gross spend. Early revenue is uncertain, and investors at this stage want the round to cover the plan even if revenue comes in late. BurnRateIQ sizes the suggested raise as 20 months of forecast expenses.
• From Series B on, use net burn. By then revenue is reliable enough to count on, so the round covers the gap between spend and revenue.

Round the result to a clean number. Investors think in round figures, and a raise of $2.75M reads better than $2,683,140.

A Worked Example

A seed company plans to spend $180K a month on average over the next 20 months, including six planned hires. Twenty months of gross spend is $3.6M. With a 10% cushion for things that cost more than planned, a $4M raise covers it.

Check It Against Your Cash-Zero Date

Your model shows the month cash runs out with no new funding. Start raising about six months before that date, and make sure the new round pushes the next cash-zero date at least 18 months out.

Signs You're Raising Too Little

• The round covers your plan only if every hire lands on time and every deal closes.
• You'd need to raise again in under a year.
• There's no room for a slow quarter.

Signs You're Raising Too Much

• You can't explain what the extra money buys.
• The dilution is more than the milestones justify.
• You'd spend it just because it's there.

Let Your Model Do the Math

BurnRateIQ reads your plan and shows the suggested raise, the month to start raising and how long the money lasts, and updates them whenever your plan or your books change. Build your model free.