fundingI am writing my first business plan. The VC asks,
“How much money do you need?”
For how many years should I do the maths for the calculation for this answer? 1 year or more?
Thanks
When it comes to raising money, both raising too much and too little are bad. The best way of determining this is to set certain milestones and try to calculate how much money you need to hit the milestone.
In your case, if this is a seed round, you should look at what metrics your startup needs to have in order to raise a Series A. If this is a Series A round, you should do the same for Series B.
In general, seed is to get the company started, develop an MVP. Series A investors want to see some traction. Series B wants to see more traction and revenue. Series C investors want to see you starting a lot of growth and revenue and so on.
If you raise too little up front, you may need to raise more on worse terms or the startup might die. If you raise too much, you may have diluted yourself more than you needed to. In general, raising enough as you go along is most efficient because as you hit your milestones, the VCs will pay you a higher price for a smaller percentage.
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