When to raise money and what for

Raising money is selling belief in the profitability of your company. Investors buy a proof: the next 12–18 months of work makes it more likely this thing prints money.

Note: Treat the author as he has no clue on this.

When you go out

Go on an upward line. A few months of “we said this, then it happened” is what they underwrite. A marketing bump while you are already raising is fine. They buy the slope.

Go out when capital is the bottleneck, but before capital is dangerously low.

If you do not need them, you negotiate like it. They’ll smell it if you’re default dead and hoping the round saves you.

Paul Graham: fundraising is plan A, never the only plan. Michael Seibel: a round is cash, not a milestone.

Size the cheque to a named milestone. 12–18 months of spend, sell 10–20%. Over-raising is extra dilution.

The proof ladder

The letters are costumes. Underneath: team, product, a repeatable sale, then unit economics.

Stage	Prove	Money is for
Pre-seed	This team, this problem, now	Testing a thesis
Seed	People want it and come back	Finding product-market fit
Series A	They love it, it grows, the sale repeats	Scaling a thing you already found
Series B	Growth is a system. Unit economics hold	Capturing a known customer

Norway, January

Norway taxes cash in bank on 1 January. Land the cash early in the year if you can. A December close is unfortunate wealth tax on fantasy money.

Ask someone who actually tracks this

Don’t trust me, I’m an engineer. Ask a VC investor about this – they won’t disregard you for not knowing, maybe even the opposite.

• YC’s stage map gives a US flavored overview.
• Bessemer is the SaaS version of what you should have proven.

Related

• Stickiness matter

  10 Jun 2024

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  Seed-stage metrics that calm investors: revenue, churn, margins. Stickiness first, and only if you actually measure.