How to forecast your fundraising amounts from seed to exit

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Alexander is a TIA Star Contributor and publishes high-value content that serves the Asian tech community. Read more from TIA Star Contributors here.

How do you answer these questions from an investor?

• How much do you want to sell for?
• Why are you raising x amount of dollars?
• How much will you raise at your next round? When will that be?

It all starts with knowing what you want. If you know what you want, you can plan how you are going to get there.

Think about your ideal outcome: an exit. Then, trace back to the steps it will take to get there, which will give you a better roadmap.

(Most people these days will do a startup with VC investment. So, this article will focus on that.)

Fundraising in milestones

You need a paradigm change when you are a funded startup. It’s not about getting to the exit, but about getting to the next stage or milestone. There’s a reason you don’t get a US$300 million funding round when you start out—you haven’t proven enough.

So, what are you proving at each stage?

1. Angel: You’re proving that you can build a product and get users.
2. Pre-seed/seed: You are validating the core assumptions: Is there a large market? Can you do marketing that works? Can you hire talent? Etc.
3. Series A: You are showing you can start to scale the business, implement systems and processes, and make key hires.
4. Series B: This round is all about showing you can scale what you have been doing. There will still be a few kinks, but you are pretty clear about your unit economics (CAC, LTV, and payback time).
5. Series C+: You are showing that you can cross the chasm into the mainstream market and make your business a household name.

The reason the stages are so important is that investors don’t all hang out in the same pools. Growth stage investors don’t typically do series A, most series A investors don’t do seed, etc.

VCs, in the short-term, only care about one thing: that their investment gets funded until the next round. So, the key learning here is to think in terms of milestones.

Start at the end

Step one is knowing how much you want to sell for. US$1 billion? Fine.

Put that amount into context with a simple exercise. Check what the multiples are in your industry. If similar companies have sold for or trade on the public markets for 10x revenue, then you know your approximate multiple. Divide US$1 billion by 10x and you get US$100 million (this revenue is now your goal, not the US$1 billion).

Calculating per round

Why are you raising x amount of dollars?