Raise Capital When You're Ready For It

Pascal Finette

Sadly I encounter too many entrepreneurs (often first-timers) who want to raise capital too early and aren't ready to hustle to build value before going out for funding. The reality is - unless you have proven yourself either by having created value before (aka you're a second, third or nth-time entrepreneur) or you have actually created value - you will spend endless cycles chasing capital. And the capital you might be able to raise ends up being dumb capital as the smart investors will chase the entrepreneurs who have created value.



Filed Under:
Collection: Funding
Category: Deciding to Raise & Raise Amounts

What’s the problem with too much funding?

Boris Wertz

Being swamped with funding is a problem that most early stage companies would love to have. However, as an investor watching my portfolio companies and other start-ups in the market, I can see how large rounds negatively impact the culture of budding business. What’s the issue with too much funding? Here are four key drawbacks.

 



Filed Under:
Collection: Funding
Category: Deciding to Raise & Raise Amounts

Always Have 18 Months of Cash in the Bank

Chris Dixon

The question of when to raise money is one of the few times that entrepreneurs and early-stage investors have somewhat divergent economic interests. If you control a large investment fund, you always have the option to extend a company’s runway. The entrepreneur doesn’t have this option. I’ve even heard some entrepreneurs whisper about Machiavellian VCs who deliberately try to get you to the end of your runway so they can negotiate harder. I think this is a bit of a conspiracy theory. Almost all VCs I know care primarily about the success of their companies and not about extracting every last point of equity.

 



Filed Under:
Collection: Funding
Category: Deciding to Raise & Raise Amounts

What is the Right Amount of Money to Raise at a Startup?

Mark Suster

 "What is the right amout of capital to raise at a startup?” It’s a tricky question with no clear answer.  There are trade offs.  And it obviously depends on the kind of business you’re building. Any answer will be subjective and any real answer will just be explaining the tradeoffs to you.

 



Filed Under:
Collection: Funding
Category: Deciding to Raise & Raise Amounts

Angel Funding Advice

Mark Suster

Impossible to define an actual number.  My experience tells me that most individual angels like to write $25-50k checks for companies they really don’t know well.  More professional angels seem to like to do $75-100k.  Somewhat the amount you raise will depend on your needs, how much you’ve raised in the past and how much you think you can raise quickly enough.  If it’s your first ever raise, many people try to go for $100-$250k because there are less people to ask for money.  You can use this to get more product out the door, pay some staff and get your customer traction.  Most larger angel rounds are in the $500-$750k range.  Obviously harder because you either need a large anchor ($250k) or you’re talking about 10 x $50k people / 5 x $100k.  If you’re less experienced I’d probably set a max of $250k on your first raise – but I want to emphasize that every situation is unique.  I just wanted to provide some guidelines.

 



Filed Under:
Collection: Funding
Category: Deciding to Raise & Raise Amounts

How Do We Set the Valuation for a Seed Round?

 Babak Nivi

First, figure out how much money you need to run at least two experiments. Then tack on 3 more months of runway so you can raise another round before you run out of money. This is the minimum amount of money you should raise. 

 



Filed Under:
Collection: Funding
Category: Deciding to Raise & Raise Amounts

How Much Money Should We Raise?

Babak Nivi

Raise as much money as possible. With these caveats: (1) maintain control at any cost, (2) monitor your liquidation preference, and (3) act like you don’t have a lot of money. Also understand that if you do raise a lot of money, you will have to (1) “go big or go home” and (2) make a lot of progress if you ever want to raise money again. Alternatively, if you would rather maintain your exit options, at least raise enough money to run two experiments.

 



Filed Under:
Collection: Funding
Category: Deciding to Raise & Raise Amounts