How Much Money Should Be Raised?

It’s tempting to raise as much money as you can, but there are consequences that might cause problems later on.

First of all, the amount of money being raised is a good indicator of how much the entrepreneur thinks the company is worth. The thing I find most interesting is how the company arrived at that number. – Most important question: does the assumptions make sense?

Secondly, the question is, “How much money should be raised?” The right amount of money to bring into a company should be enough to reach sufficient milestones, i.e. if all goes well, the money invested will be used to drive all sorts of risks out, or to take the company to a cash flow positive position etc. What the investors really want to know is where you’re going to spend the money. Can you do it for less? What would you do if you had more money? – I mean, for the company’s use.

Third, if you raise too much money early on, you could be selling off too much of the company for too little cash.

Fourth, you should use early-stage funding to increase the company’s value so that, in the next funding round, you can raise more money with less dilution.

Bottom Line: The ideal amount of money to be raised is not always clear, instead, your answer to the question of why the company is raising this amount of money is more crucial.