How much capital should you raise in your next round of investment?

Oct 17, 2020 · 3 mins read
How much capital should you raise in your next round of investment?
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If your company has been growing steadily, you are probably about to take the next step and look to raise venture capital to take the company to the next level.

Similar to the Shark Tank program, you will have to present your company to investors, be able to provide them with the real numbers of your company, its value and the amount of money you expect to raise and what that investment will be used for.

Before you sit down to talk with investors there is usually a previous conversation, where there will be a series of questions and if you are not able to answer, think that you are closing the doors, you will probably miss the opportunity to receive a next appointment and consequently an investment.

There are many things investors are looking for when reviewing your account, but beyond knowing your income, margins and capital expenditure, you should also pay attention to cash in, cash out and company milestones. In short, a Venture Capitalist wants to see how much capital you are raising, how long it will last and what you will do with it. The data you have to provide has to be realistic, justified, since it is part of the risk that an investor takes with you.

Cash In

The Cash In money you want to raise and your Venture Capital seeks to make it reasonable. For this reason, G2 Consultants recommends asking the following questions:

  • Are you raising the right amount of capital in relation to what you want to achieve?
  • In relation to the size of the team?
  • In relation to your needs?

It is recommended to think in periods of 12, 18 or 24 months. Don’t ask for more than you need, implement a solid plan to strategically execute your company. Generally, these types of suggestions will not be given to you, they will simply let you know that they are not interested in your company.

Cash out

Basically it refers to when your company runs out of money. Generally, you are expected to raise capital for 12, 18 or 24 months. But, if your runaway is much shorter, consider enough time to raise your next round so you don’t run out of money.

It is recommended that you do not make a plan to be financed for more than two or three years. What investors expect is that the capital they bring to you will begin to pay off, since what the funds are looking for over time is an exit strategy with a much higher value that will generate the expected returns of what they once invested.

Many Venture Capital investment funds will lead one round and probably approach you with other funds for subsequent rounds. So don’t overlook the following questions: What would you have to accomplish the next time you go out to raise capital? Will it be enough for another Venture Capital to show interest? Will the milestones achieved be enough for a Venture Capital to pay a higher price in your next round of funding? Will you have made enough progress?

Creating a capital raising strategy is not an easy task, it requires the accompaniment of an expert who knows how to implement one that is adequate for the needs of your company, ensuring that your numbers are correct and that it has links to the right investment funds for your next rounds. May your round of capital raising be impeccable!