How Much To Raise
One question I often get from entrepreneurs is how much should I raise? In this instance let’s assume you are going to raise money (read here as that is not always the best or only path). Obviously a specific number depends on many factors including market, product, traction, usage, etc. But assuming you have mapped out a valuable and optimal use of funds, should you raise the minimum or maximum possible given the current environment? There are arguments on both sides.
If you opt for this route, you minimize dilution and maximize focus on putting the funds to optimal use. Because you maintain cash flow constraints, each decision to spend money is carefully considered. You also maintain more control over the business strategy, pace of growth, and decision making. However, this may result in slower growth (less money to pour onto the fire and grow quicker) as well as greater risk of getting stuck in a bridge round if something unforeseen happens that changes your plan (which is possible).
If you opt for this route, you go raise as much money as the market will bear with a strong valuation. This can provide a lot of capital to quickly accelerate growth as well as experiment with new ideas. If things go as planned, this can be a great strategy to enter hyper-growth mode and get you to the next round of financing or exit. However, this may result in spending cash on suboptimal uses or experiments (given less immediate cash pressure), could create more dilution, and could come at a valuation so high it takes remarkable growth to keep pace with investor expectations for the next round.
In either scenario, money is green. More important is finding an investor that compliments your skill set and will truly add value to you growing the company. Not only that, they have a style that you like to work with. Just because an investor offers the most money at the highest valuation does not always mean that is the best course. There are many things in life that are relationship based and not chosen solely on price alone (home, doctor, spouse, etc.)
I suggest finding a partner that you trust, can add value to your business, and has a style that works well with your team. From there, you can work together to determine the optimal funding path to continue growing your business. In most cases, I find it best to raise closer to the minimum needed (still getting you through +/- 18 months of runway) to maximize focus and minimize dilution. In the event you have a fully functioning team, sales process, go-to-market activities, etc. and just need fuel then go big … and buckle up to enjoy the ride!