How Much Money Should You Raise in Startup Funding?

One of the most common questions I hear from founders is, “How much money should I raise, and at what valuation?” 

The answer is a balance between what you should raise and what you could raise. Let’s break down how to approach this for the best possible fundraising outcome.

The best outcome is when the amount you should raise to hit the next inflection point for your business is within the range of the amount of money you could raise based on the current market and the company’s past fundraising history.

How Much Money Should You Raise?

The amount of money you should raise comes from analyzing your strategy and determining where capital can accelerate your success. A useful rule of thumb is to raise enough to hit your next major inflection point, plus six months of additional runway—because things always take longer than expected.

Identifying Your Inflection Point

Your inflection point should be a milestone that could double your company’s valuation. This could be hitting profitability, launching a product, or reaching a key metric like ARR (Annual Recurring Revenue) or user growth. Early-stage investors are often looking for signs that your company can achieve a significant valuation bump within 12–24 months, as that helps them raise their next fund.

When you think about how much you should raise, do it in isolation—don’t worry about market conditions or fundraising history just yet. This gives you a clear view of what your business truly needs to succeed, even if the final amount raised differs from this number.

How Much Money Could You Raise?

This is where the current market conditions and your company’s fundraising history come into play. Fundraising norms vary based on factors like company type, market trends, and investor sentiment, creating some guardrails around how much you could raise and at what valuation.

Understanding Market Conditions

The fundraising market is always shifting, so check recent deals in your space for benchmarks. For example, the size and valuation of seed rounds can vary depending on your industry and business model. If your company fits well within an established category, recent funding rounds from similar companies can give you an idea of what to expect.

Cap Table Considerations

Your cap table and previous funding rounds will also impact your raise. Ideally, you want to raise an “up round,” meaning your pre-money valuation should be higher than your last post-money valuation. A general goal is to aim for a pre-money valuation that’s double your previous valuation, and to raise 50% more capital than in your last round.

While it’s possible to deviate from these norms—raising a flat round, a down round, or less capital than before—it makes your fundraising more challenging. Investors will ask why, and you’ll need strong answers ready to address their concerns.

Testing the Market

The tricky part about how much you could raise is that it often requires testing the market directly. You can gather as much intel as possible, but until you start pitching, you won’t know for sure how investors will respond. Be prepared to adjust based on real-time feedback.

Final Thoughts

The ideal fundraising amount lies at the intersection of what you should raise and what you can raise. If the amount you can raise falls well below what you need, it’s time to rethink your strategy. Conversely, if the market allows for raising significantly more than you need, carefully consider whether to take the extra capital or adjust your goals accordingly.