A popular question in the entrepreneurial fundraising world is “How long should I make the money last before raising another round?” Of course, my advice is to raise as little money as possible until there’s a repeatable customer acquisition process (then, outside capital will have a dramatic ROI). Now, that’s not always possible, and fundraising is a part of life for many tech startups.
After making a number of angel investments and working with entrepreneurs, my recommendation is to make funding last 18 months. Here are a few reasons why:
- Fundraising, when it goes well, typically takes six months, so 18 months provides for 12 months of focusing on the business
- Milestones often take twice as long and cost twice as much to achieve, so more time is ideal to figure things out
- Hiring is a major effort once fundraising is done, and it takes serious time to find the right people and train them, so a sufficient timeline is needed for the startup to execute
The next time an entrepreneur is building a budget for investors, push for making the money last 18 months. Fundraising requires a significant amount of time and takes away from growing the business.
What else? What are some other thoughts on making funding last 18 months?