Raising funds for your startup isn’t just about getting a yes from investors, it’s about asking for the right amount. Ask for too little, and you’ll fall short before hitting critical milestones. Ask for too much, and you may appear inexperienced or give up more equity than needed. Here’s how to strike the right balance:
1. Begin With a Clear Understanding of Your Business Goals
Start by identifying exactly what you want the funding to help you achieve. Investors want to know what their money will be used for and what milestones you plan to reach with it. These could include:
- Hiring specific team roles
- Expanding into a new market or region
- Building out technology or infrastructure
- Scaling customer acquisition or marketing efforts
- Launching a new product line or feature set
Each goal should be tied to a tangible cost. If you’re hiring, research competitive salaries in your location or industry. If you’re launching a product, estimate development, testing, and launch marketing costs. This exercise creates a bottom-up funding estimate based on your startup’s operational needs, rather than a vague lump sum.
2. Calculate Your Monthly Burn Rate
Your burn rate is the amount of money you spend each month to operate your business. This includes payroll, rent, software tools, server costs, marketing, and any other recurring expenses. Once you’ve calculated your burn rate, you can determine how much capital you need to extend your runway, and the number of months your business can operate before it runs out of cash.
Most startups aim for 12 to 18 months of runway with each fundraising round. This gives you enough time to reach meaningful milestones that can lead to your next round of funding or even profitability. For example, if your monthly burn rate is $25,000 and you want an 18-month runway, you’ll need at least $450,000.
But don’t stop there.
3. Add a Buffer for Unforeseen Expenses
Buffers are additional time, resources, or budget allocated to accommodate unforeseen delays or issues. They provide flexibility, ensuring that projects can be completed on time even when unexpected challenges arise. Even the most well-planned budgets can run into surprises. Maybe a new hire backs out and delays product development, or a marketing campaign doesn’t convert as expected. That’s why it’s wise to add a 10–20% buffer on top of your estimated needs to give your startup breathing room.
This financial cushion shows investors that you’re thoughtful and prepared for potential obstacles, rather than overly optimistic. It can also help prevent a desperate return to the fundraising table in case your plans take longer than expected to yield results.
4. Consider the Stage and Norms of Your Industry
Your startup’s stage and industry play a big role in determining how much funding is reasonable to ask for. A pre-seed startup is generally expected to raise between $50,000 to $250,000, often used for building an MVP or early testing. At the seed stage, rounds typically range from $500,000 to $2 million, with the focus on acquiring users, proving product-market fit, and generating early revenue.
Understanding these norms helps you stay within a range that investors are comfortable with. Asking for $5 million when your product hasn’t launched or hasn’t yet generated revenue can raise questions about your judgment and financial discipline.
That said, every startup is unique. If you have an unusually capital-intensive business, say, one that requires heavy infrastructure or regulatory licensing your funding ask may need to be larger. The key is to justify your ask with clarity and confidence.
5. Align the Ask With Specific Milestones
Investors aren’t just funding your present—they’re investing in your future. One of the best ways to determine how much to raise is to tie your funding ask to milestones you want to achieve before your next round. This could include:
- Launching a public product version
- Reaching 10,000 users
- Generating $100,000 in monthly recurring revenue
- Signing 50 paying enterprise customers
If your funding request supports specific, measurable outcomes, it demonstrates strategic thinking. You’re not just burning cash—you’re using capital to reach a defined checkpoint that will increase your valuation or attract the next round of funding.
6. Factor in Your Desired Ownership
Equity is one of the most valuable resources you have. Make sure you understand how your funding ask will impact your cap table and ownership dilution. A typical seed round may involve giving up 10–25% of your company. But if you raise too much too early at a low valuation, you may end up overly diluted and constrained in future rounds.
Work backwards from the equity you’re comfortable giving up, the valuation you expect, and how much you need. If you’re targeting a $1 million raise and want to give up 20% equity, you’re aiming for a $5 million post-money valuation. This helps you maintain balance between capital needs and long-term ownership.
Final Thoughts
There’s no magic number that applies to every startup, but there is a smart process for arriving at your funding ask. It’s a blend of strategic planning, financial modeling, industry awareness, and clear communication. Investors appreciate founders who can back their funding request with logic, data, and a vision for where the money will take them.
Remember: you’re not just asking for a check, you’re building a relationship. Showing that you’ve thought through your funding needs in detail helps build trust and positions you as a credible, capable founder.
Ready to Raise Smart? Let’s Help You Do the Math.
At Halisi Consults, we guide you through the funding process with our investor readiness services. Click here to book a free consultation with our team today.