seedcamp

During a fundraise, sizing the round is as much art as it is science. First and foremost, any fundraising event should be rooted in the principle of how much money a startup needs to raise to hit some meaningful future milestone which would position the startup to raise its next round. However, at each stage (Seed, A, B etc) raise amounts can have wide ranges and choosing which number to put in a deck can have a big impact on the momentum of a round. This decision is even more important in today’s fundraising market where it seems startups either fly out the blocks and get multiple termsheets in short succession or it’s a much more challenging and prolonged process. My advice is to pitch the ask at the lower end of the range you have in mind so as to reduce funds potentially qualifying themselves out early in a process if the ask is too punchy. If the round has significant momentum, it’s much easier to size up a round and raise more and I’ve seen this happen very regularly. On the other hand, if the raise amount is pitched too high there’s the risk of not generating enough initial interest and potentially having to reduce the raise amount. Reducing during is a trickier message to pull off given the signal it could send to the market on how a fundraise is going. In today’s VC fundraising market where we have mega rounds being raised v. early for companies on a regular basis it’s easy and massively understandable to look to those and be influenced. I’ve had many founders say to me that a competitor raised $$$ millions so we should at least raise that. There’s merit to this in terms of perception in the market and in turn brand awareness that can lead to talent (hiring) plus potentially future financing. However, imo, shooting to win on the headline number is not the best approach. Better to set the amount at an ambitious level but also one where the company can have the most momentum out of the gate and with potential optionality to size up the round if it really hits.