“These decisions have implications on our ownership and the growth path of the business.” 

Basic Approach

Given all of these factors, the basic premise is that you should raise the sum of three amounts:

• Amount Need for Key Milestone Achievement. as much money as your company needs to achieve the milestones you believe necessary to reach a significant inflection point in the value of the business.
• Add for Six Months. at least six months to the amount of money you need for your next milestone to include time to go fundraising.
• Amount for a Buffer. Build buffer for the inevitable mistake or two in either your estimations or execution –usually one to two quarters.

It’s important to have a realistic plan and a clear view of the meaningful milestones and resources needed to deliver on that plan. If you plan wisely, you will have a pretty specific amount of capital you know you need.

Timing

The best time to go fund raising, is just before of after the successful completion of a key or series of key milestones.

• Before. For example, right before a key milestone, you can woo new investors with the promise of how successful you will be at the completion of the milestone. Basically you convince them that if they don’t get into your company by investing now, that they won’t have a chance after you’ve achieved the milestone because many others will also be interested and the competition will be stiff (remember, investors don’t want to lose out on potentially hot deals).
• After. Shortly after achieving a key milestone is also a good time to try and convince investors because you’ve effectively accomplished a major thing (like launching a product), which de-risks the investment for them, but they can still get in the company before it ‘takes off’.

The worst time to go fundraising is when your last major milestone has grown stale and the next one is too far away to be de-risked.