Ask for too little and you’ll be fundraising again before you’ve proved anything. Ask for too much and you may give away more of your company than you need to. Here’s a simple way to work out how much to raise at pre-seed.
Start with the milestone, not the number
Decide what the round needs to prove. Pick one or two milestones that would make your next raise easier, for example:
- 100 weekly active users
- three paid pilots with businesses
- $5k in monthly revenue
Everything else follows from this.
Work out what it costs to get there
List what you need to reach the milestone and how long it will take. For most early startups the big costs are:
- people, including any pay for the founders
- building the product
- finding customers
- tools, legal and admin
Be honest about timing. Things usually take longer than planned.
Add a buffer
Add roughly three to six months of extra runway. It covers delays and gives you time to raise the next round without rushing, because fundraising itself takes months.
Sense-check the number
- Could you reach the milestone with less? If so, consider raising less now.
- Does the amount match what investors at this stage usually write? Our cheques are $5k to $50k, for example.
- How much of the company are you giving away? Early rounds should leave plenty for future rounds and hires.
Explain it in one or two sentences
Investors want to see that the number comes from a plan. For example: “We’re raising $40k to reach 50 paying customers in nine months. About 60% goes on product, 30% on sales and 10% on running costs.”
A quick example
A two-person team building software for small gyms wants to prove gyms will pay. They expect it to take eight months to sign 30 paying gyms. Product work, a small marketing budget and tools come to about $30k. They add a buffer and ask for $40k. Knowing how much to raise, and why, makes that a clear and believable ask.
If you’ve worked out your number, apply for funding with us. If you need a bit more time, save your spot and finish when you’re ready.
