The question I get often get asked is, “How much should my startup raise?” There really is no right or wrong answer, but the rule of thumb is simple: only raise what you NEED. Even if you have a sugar daddy/mommy who gave you their Black Card to spend, you still need to raise the right way.
In most cases, what you need is enough capital to run the startup for at least 6-12 months. You also need adequate funds to make key hires to add the necessary pieces to scale and build the product/service. Here are some general guidelines:
Funding: Raise between $250,000 and $1 million
Size of team: Keep it small, a max of 10 members consisting of only key employees (engineers, designers, analysts). I recommend hiring marketers, brand and social media managers when your product or service is more developed.
When it comes to the key hires in an early-stage startup, it might be wise to offer bigger equity stakes in exchange for a lower salary—this way it can help maintain your capital flows more efficiently. A lot of founders might be reticent about giving away chunks of the company, but the early hires are often the most important hires. Therefore, rewarding them is key.
In any case, you should never over-raise, especially if you are just starting out. Overfunding can lead to a misuse of capital, such as overhiring, and building a fancy office (the latter of which happens quite often). The temptation of excessive capital can be all too alluring. Don’t fall into the trap!
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