How much should we raise?

Ask a room of founders how they chose the size of their last round and the honest answers are rarely about a plan. A peer raised ₹15 crore at the same stage. An investor mentioned a typical cheque size. The founder wanted 18 months of runway and multiplied last month's burn by 18. Someone said that anything less would look unambitious.

Each of those is understandable. None of them is a good way to decide one of the most important numbers in the life of the company. Raise too little and the company is back in the market before it has reached anything that justifies a higher valuation. Raise too much, or try to, and you either give away more of the company than you needed to, or you spend months chasing a number the market won't give you.

There's a better way, and it starts from the other end.

Start from the milestone, not the number

A round exists to get the company from where it is now to a point where the next thing is possible. Usually that next thing is another round at a meaningfully higher valuation. Sometimes it's break-even, so the company never needs to raise again unless it chooses to.

So the first question isn't how much. It's what the company needs to have proved by the time this money runs low. For a seed company heading to Series A, that might be a level of recurring revenue with retention strong enough to show product-market fit, a repeatable sales motion, and unit economics that point the right way. For a Series A company heading to Series B, it might be a revenue scale, a proven second channel, and a clear path to profitability.

Be specific, and be realistic about what investors at the next stage will actually want to see. A milestone that sounds impressive in your deck but wouldn't move the next investor is the wrong one to fund.

Build the number month by month

Once the milestone is clear, build the plan that gets there, month by month. This is the operating plan, not the pitch model.

• ·The hires needed to reach the milestone, with realistic start dates and fully loaded costs, not salaries.
• ·Marketing and sales spend, tied to the customers or revenue the plan assumes.
• ·Product and infrastructure costs as they scale with usage.
• ·Office, tools, professional fees, audit and legal, including the annual costs that land in particular months.
• ·Working capital: receivables from customers who pay slowly, inventory, deposits.
• ·Any capital spending: equipment, fit-outs, new locations.
• ·Revenue and collections, at a pace your own history supports.

Net those out month by month and you have the cash the plan consumes until the milestone is reached. That's the first part of the number.

Add the months the next raise will take

The company doesn't stop spending on the day it reaches its milestone. It has to keep operating, and usually keep growing, while it raises the next round. Raising takes months: preparing, meeting investors, getting to a term sheet, diligence and legal work, and finally the money arriving. It often takes longer than planned, and the months it takes are expensive, because by then the company is at its largest burn.

So add the cash needed to operate through a realistic fundraising period after the milestone. And because investors negotiate harder with companies that are visibly running low, plan for the next raise to start with a comfortable amount of runway remaining, not just enough to close.

Add a buffer for things taking longer

Plans slip. Hires take longer to find. Sales cycles run longer. A key customer delays a launch. None of these is unusual, and a round sized with no room for them is sized for a best case that rarely happens.

A buffer of a few extra months at the burn rate the company will have near the milestone is a reasonable way to allow for it. It isn't padding. It's the difference between reaching the milestone with time to raise properly and reaching it with a month to spare.

Worked through

Here's an illustrative example with invented figures. A software company with ₹1.6 crore in the bank is preparing its Series A. Its milestone is a revenue scale and retention level it believes will support a strong Series B, and its plan reaches that in 15 months.

The plan's burn starts at ₹45 lakh a month and rises steadily to about ₹80 lakh by month 15 as the team grows. Adding up the fifteen months, the plan consumes about ₹9.4 crore to reach the milestone.

Next, the fundraising period. The founders expect the Series B to take around six months from starting preparation to money arriving. At ₹80 lakh a month, that's another ₹4.8 crore.

Then the buffer. They allow three months for the plan taking longer than expected, at the same ₹80 lakh: ₹2.4 crore.

The total cash needed comes to about ₹16.6 crore. Subtracting the ₹1.6 crore already in the bank, the company needs to raise about ₹15 crore.

That happens to match the number the founder first had in mind because a peer raised it. The difference is that now every crore of it is attached to something: fifteen months of plan, six months of raising, three months of buffer. When an investor asks why ₹15 crore, the founder can show the answer instead of defending it.

Now check it against dilution

The number from the plan is what the company needs. The valuation is what decides what it costs. The two have to be looked at together.

Continuing the illustrative example: if investors value the company at ₹60 crore before the money, raising ₹15 crore means selling 20% of the company. If the market only supports ₹45 crore before the money, the same raise means selling 25%. Add an ESOP pool expanded before the round, which is common, and founders' ownership falls further.

If the dilution is acceptable, the number stands. If it isn't, the arithmetic doesn't change on its own. What has to change is the plan. The options are usually some combination of these:

• ·Choose a nearer milestone that still moves the next investor, and fund only that.
• ·Slow the hiring plan, accepting a longer path to the milestone in exchange for less cash.
• ·Find revenue earlier: pricing changes, annual prepaid plans, a channel that pays back faster.
• ·Cut costs that don't contribute to the milestone at all.
• ·Accept the dilution because the milestone is worth it, and say so clearly to yourself and your co-founders.

What doesn't work is raising a smaller amount while keeping the original plan. That's the most common way companies end up short of their milestone and raising again from a weaker position.

Too little and too much

Raising too little is the more dangerous mistake, and the more common one. The company reaches month twelve with the milestone half done, starts raising early with a story that isn't finished, and either takes a flat or lower valuation or an internal bridge on tougher terms. Everything the round was meant to prove gets proven late, if at all.

Raising too much has quieter costs. More dilution than necessary, obviously. But also a tendency for burn to rise to fill the money available, hiring ahead of what the business can absorb, and a higher bar at the next round, because investors will expect progress proportionate to the capital raised. A company that raised ₹30 crore and reached what a ₹15 crore plan would have reached looks inefficient.

Somewhere between the two is a number that funds a real plan with room for reality. That number is the one to go and raise.

When the market offers less than you need

Sometimes the plan says ₹15 crore and the conversations say ₹10 crore. Before accepting the smaller number, rebuild the plan for it. Which milestone can ₹10 crore genuinely reach, including the fundraising months and a buffer? Is that milestone still strong enough for the next investor? If yes, raise ₹10 crore against that plan and tell investors exactly what it funds. If no, a smaller round against the original plan is a round that is likely to run out before it proves anything.

This is also where existing investors matter. They may be willing to take part of the gap, or to agree an extension on the same terms if specific targets are hit. Those conversations go much better when the plan behind the number is clear.

If you're aiming for break-even instead

Some founders want this to be the last round, or at least want the option. The same method works, with a different milestone. Build the plan to the month the company covers its own costs from revenue, add a buffer for that month arriving late, and add a cash floor the company intends to keep afterwards.

Two things change. The buffer should be larger, because there's no next round to rescue a plan that slips. And the plan needs a version where growth is slower but costs are cut earlier, since reaching break-even is often less about growing faster than about deciding which spending to stop and when. If both versions reach break-even inside the money raised, the company has genuine independence. If only the optimistic one does, it's a plan to raise again with a different story.

How to present the number

Investors don't need a thirty-row spreadsheet in the deck, but they do want to see that the ask is connected to a plan. A single slide covering the amount, the milestone it reaches, the months of runway it provides including the next raise, and where the money goes by broad category, is usually enough. The detailed plan belongs in the data room, and it should agree with the slide to the rupee.

Two things weaken an ask quickly. A use of funds that doesn't add up to the amount raised. And runway that comes out at exactly eighteen or twenty-four months under every scenario, which suggests the number was chosen first and the plan fitted to it afterwards.

What to do before your first investor meeting

1. 01Write down the milestone the round has to reach, in terms the next investor would recognise.
2. 02Build the month-by-month plan to get there at fully loaded cost, and add up the cash it consumes.
3. 03Add the cash needed to operate through a realistic fundraising period afterwards.
4. 04Add a buffer of a few months at the burn rate you'll have by then.
5. 05Subtract cash already in the bank.
6. 06Check dilution at a realistic valuation range, including any ESOP pool expansion.
7. 07If the dilution is unacceptable, change the plan and repeat, rather than simply lowering the number.

The founders who can explain their number calmly, and show how it changes if the valuation or the timeline moves, tend to be the ones investors trust with it.

Who wrote this

Shafneed is the founder of Simplify, a finance clarity and investment readiness practice working with founders across India. He writes about the questions founders bring before a decision, not after it.