How Much Should You Raise? Calculating Your Funding Needs

How much money should you raise? The answer is not simply "as much as possible." The right funding amount balances growth ambitions against dilution, runway against milestones, and opportunity against risk. Getting this calculation right is fundamental to your fundraising strategy.

The Milestone-Based Framework

The most reliable way to determine your raise amount is to work backward from milestones. What do you need to achieve to raise your next round at a meaningfully higher valuation?

The Calculation

1. Define the milestones needed for your next round
2. Estimate the time required to achieve those milestones
3. Calculate the monthly burn rate needed to hit those goals
4. Add a buffer (typically 6 months)
5. Multiply monthly burn by total months

Understanding Burn Rate

Burn rate is how much cash you spend each month. It is the foundation of your funding calculation.

Components of Burn Rate

• Salaries and benefits: Usually the largest component
• Infrastructure: Cloud services, tools, software
• Marketing and sales: Customer acquisition costs
• Office and operations: Rent, insurance, legal
• Contingency: Unexpected costs (always have buffer)

Gross vs. Net Burn

• Gross burn: Total monthly expenses
• Net burn: Expenses minus revenue

Most early-stage companies focus on net burn, which accounts for revenue offsetting expenses.

Calculating Runway

Runway is how long your company can operate before running out of cash. It is simply cash divided by monthly net burn.

Runway Targets by Stage

• Pre-seed/Seed: 18-24 months to achieve product-market fit milestones
• Series A: 18-24 months to scale go-to-market
• Series B+: 24-36 months to achieve growth targets

Thinking About Dilution

Every dollar you raise comes at the cost of ownership. Understanding dilution helps you balance growth needs against founder equity.

Typical Dilution by Round

• Pre-seed: 10-15% (if raising from investors)
• Seed: 15-25%
• Series A: 20-30%
• Series B and beyond: 15-25%

These are rough guidelines—actual dilution depends on market conditions, traction, and negotiation.

Strategies to Minimize Dilution

• Raise at higher valuations by demonstrating strong traction
• Use non-dilutive capital (grants, debt) where appropriate
• Achieve more with less to reduce capital needs
• Time your raise during favorable market conditions

The Risks of Getting It Wrong

Raising Too Little

• Forced to raise again before hitting milestones
• Distraction of constant fundraising
• Weak negotiating position if metrics are not yet strong
• Risk of down round if timing is bad

Raising Too Much

• Excessive dilution at early valuation
• High expectations from investors (valuation trap)
• Temptation to spend inefficiently
• Harder to achieve returns for investors at exit

Use of Funds Breakdown

Investors want to see that you have thought carefully about how you will deploy capital. A typical use of funds breakdown includes:

• Product/Engineering (30-50%): Building and improving your product
• Sales/Marketing (20-40%): Customer acquisition
• Operations (10-20%): Support, infrastructure, admin
• Reserve (10-15%): Buffer for unexpected needs

Special Considerations

Market Conditions

In frothy markets, raise more while capital is available. In tight markets, focus on efficiency and extend runway.

Business Model

Capital-intensive businesses (hardware, biotech) typically need larger rounds. Capital-efficient businesses (SaaS, marketplaces) can do more with less.

Target Growth Rate

Higher growth targets require more capital for hiring, marketing, and infrastructure. Be realistic about what growth rate you can achieve.

Right-Size Your Raise

The right amount to raise is specific to your situation—your milestones, your burn rate, your market, and your risk tolerance. There is no universal formula, but the frameworks above help you make an informed decision.

Once you know how much to raise, make sure your deck justifies the ask. Pitch AI helps you present a compelling case for your funding needs.