Make Funding Last 18 Months

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?

2 thoughts on “Make Funding Last 18 Months

  1. Something else I noticed, for B+ rounds, is the amount of cash raised usually matches revenue for the next 18 months. No data to prove this, though.

  2. In an ideal environment, 18 months is a good target. However, it is always hardest to raise money (and the money is most “expensive” in terms of equity dilution) after a misfire in developing a sustainable customer acquisition process. My suggestion is to raise more money than you need when you can raise it and take into account the confidence you have in your marketing success. It also provides a cushion in case of unforeseen “outside” influences such as an unexpected loss of a key employee or some kind of economic event which might slow your progress.

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