How Much Capital Is Enough For Your Startup


Every startup needs capital infusion to function and grow like a normal business. And that capital needs to be raised from the right source in the beginning of your business. Startup founders have a huge hurdle to cross when it comes to financing. There are always different options to consider but raising the needed capital is always a problem. Some startups raise more than needed and overspend, others raise just enough but along the way seek for more infusion if cash. Most startup founders consider-which type of investment to raise, partners needed to help the company succeed, dilution options in the future, the amount of money needed to kick start the business and the partners needed to take the company to a successful future. Others have considered a bank loan where necessary.

If you started on a good note, you should have milestones from what is typically the first to what is typically the last in a given year or period. Building version 1.0 of your product could take longer than planned. You should plan for that before you approach an investor. But you may never get it right the first time. You should seek legal assistance where necessary. Some startup mentors are of the opinion that If you can raise more money at a higher valuation, you can able to push your startup further down the company lifecycle, hence you lose less in equity. In that case you can take more money.

Babak Nivi- AngelList and Venture Hacks
Raise less if you want to keep your valuation down and keep the option open for an early exit where everyone (investors, employees and founders) makes money.

At the seed funding stage when you sell shares in your startup, the price will likely be at the  lowest it will likely be. At this time  founders naturally want to sell as little of that stock as they can to protect their ownership. Of course that makes sense. Raising funds depends on the type of business or idea you are working on. Some businesses require aggressive direct marketing that may demand huge funds to go-to market. Others require little or no funds  to market. If you a building an enterprise app, you marketing strategy will be different from a startup developing consumer app. But in every case, you want to have enough to get to a big milestone but not so much that you are spending it too fast and without consideration.

Uncertainties inherent in technology research and development and customer traction can change your milestone and development plan as you build your first version. This may require another round of funding if you have already raised your first round. Most startup have shipped later than planned and that would require additional funds. No matter your source of funding-bootstrapping, family and friends, startup accelerator, angel investors or even an loan from a corporate bank, you should be able able to raise enough to take you through your first build-version one.

+ There are no comments

Add yours

Leave a Reply