How much should a startup raise?

Enough to get through a specific obstacle and reach the next proof point, and no more. Be able to show exactly where every part of it goes. Raising more than you can justify usually just costs you equity you did not need to sell.

How much equity should you give away in a funding round?

As little as you can, especially early. Giving away 10 to 20 percent for 25 to 50 thousand before you have traction is a poor trade, because a weak valuation means you sell a big chunk of the company cheaply.

Who should you raise from, angels or VCs?

Roughly, angel investors for a five or six figure raise, and VCs for seven figures. Matching the size of the raise to the right kind of investor avoids a lot of wasted meetings.

How much should you actually raise?

The number matters less than being able to explain it. Here is how I think about the amount, the dilution, and who to ask.

When founders ask me how much they should raise, they usually want a clean number back, and the honest answer is that the number matters less than being able to explain it. Investors want you to be really clear on how much you want, and even more on where it is going to go. If I give you five hundred thousand, I want to know that this much is going on tech to achieve that, and this much on marketing to achieve the other thing. Vague gets you nowhere, and a precise, well-argued ask does more for you than any headline figure.

Do not give away too much, too early

The second thing is not to sell off too much of the company before you have to. I have seen founders raise twenty-five or fifty thousand for ten or twenty percent, and that is just not very much money for that much equity, especially before you are validated. Until you have traction your valuation is going to be weak, because you have not proven anything yet, so raising early usually means selling a big slice of the business cheaply. If you can get to even a little validation first, the same raise costs you far less of the company.

Money is fuel to get through a wall

The best way I have heard it put is that taking investment should be the thing that helps get you through a brick wall. It is not free money, it is not validation, and it is not a milestone to celebrate on LinkedIn. It is fuel to get past something you genuinely cannot get past on your own, and if you can get there without it, or with less of it, often you should. Sometimes the right amount to raise is nothing at all for now, particularly if you are already generating revenue and you do not actually need the money to reach the next proof point.

Match the size to the right investor

Roughly, the amount points you at who to ask. If you are raising five or six figures, that is angel territory. If you are raising seven figures, you are talking to VCs. Matching the ask to the right kind of investor saves everyone a lot of wasted meetings, and it is worth being clear-eyed about which one you are before you start sending decks around. If a bank loan is also on the table, that is a genuinely different decision, which I have written about in a bank loan or an investor.

So, before you settle on a figure

Be able to say exactly what the money buys and what that unlocks, do not sell more of the company than the money is worth, and match the size of the raise to the kind of investor who writes that size of cheque. Get those three right and the headline number mostly takes care of itself.

Raise what gets you through the wall, and not a penny of equity more than that costs.