How Much Capital Should I Raise?

This is the wrong question.  The right question is: How much capital do I need to achieve my goals for the next 18-24 months?

If you raise more capital than that, you will give up too much ownership in your company.  If you raise less than that, you’ll be in continuous capital raise mode and waste valuable time that could be spent running the business.

If you can’t answer this question, you should not be raising capital yet.  Every investor will ask you how much capital you’re looking for and what the capital is for. It will be seen as a big red flag to investors if you can’t answer these questions.

The best way to determine how much capital you need is by creating a bottoms-up analysis of your anticipated expenses.  This analysis is called a use of proceeds.

Here are the primary uses of proceeds:

Financial:

  • Liquidity for existing shareholders
  • Pay down existing company debt
  • Fund working capital

New Hires

  • Sales & Marketing
  • Operations
  • Executives
  • Back Office

Growth Opportunities

  • Building new products/services
  • Purchasing acquisitions
  • Taking on large customers

Cap-Ex

  • Equipment
  • Facilities
  • Technology

Other Expenditures

  • Sales & Marketing
  • Technology
  • Consultants
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