How Much Money Should We Raise?

How much money should a company looking for a venture capital investment ask for? The best answer to this question is not an answer at all because it is “It depends.” However, the general rule of thumb would require the management team of, let’s say, an expansion stage Technology Company to answer two questions in order to ballpark the number that they need to raise. First being “Where do we want to get to?” and second “How much are we willing to give up for it?” In my opinion the first question is a lot more important, as the answer to it largely determines the value behind the second question.

When a management team of a private company asks itself “Where do we want to get to?” they will cover the company’s goals, the timeframe to achieve these goals, and most importantly, the total amount of money that they will take to get there. Of course, answering all these aspects of this one single question requires a great knowledge on the company’s market, product, customers, etc. However, once the knowledge is achieved and the answers are provided, the final total amount that is derived is the number that our expansion stage Technology Company will have to “take to the bank”, or rather get form the VC. 
  Next is the negotiation stage, where the management team of the Company will try to give the least equity share for the amount that you need. However, it is important to remember that the “Where do we want to get to?” question in this blog post really revolves around and is very dependent on the answer to the question -”How much money should we raise?”