I often hear founders say they are raising money to increase their runway by 18 to 24 months. In a sense, that is accurate, but only from the startup’s point of view. However, that’s not what an investor is looking for. Your company surviving for another year and a half is not the goal of a fundraise; that’s a side effect at best. It’s probably a decent guess for how long the next stage of the company will take, but only because 18 to 24 months is typically the time horizon you can semi-reliably predict.
But what happens at the end of those 18 months?
Instead, founders should communicate to investors what a round of funding unlocks. That’s expressed in milestones, not in time. The goal is to transform the company sufficiently that you can do something that you cannot do at this moment.
How much to raise?
How do you know how much money you need to raise? It’s a tricky question, but it’s a critical aspect of your startup journey. Establishing a clear and realistic fundraising target requires careful consideration with one goal in mind: What hoops do you need to jump through in order to be able to raise your next round of funding.