When planning your next financing round, remember: investors typically expect valuations to be 3–4x the new funds raised. Your round should be about 5x larger than the previous one and should provide around 15 months of runway. Structured growth with clear KPIs for each phase is essential. Raise just enough to hit these milestones and convince later-stage investors to fund the next phase.

In almost every meeting with founders, we get the same question: "How much should we raise?" Unfortunately, there's no one-size-fits-all answer. However, the following insights can help you determine the optimal amount for your tech startup and craft a convincing story around it.

🧭 Pre-seed funding and valuations

A healthy pre-seed funding amount is typically under $1 million. Here’s the regional breakdown for median pre-seed valuations in Q1 2024:

• United States: $5,8M

• Europe: $5,1M

• Southeast Asia: $3,6M

• Middle East: $3,8M

• Latin America: $2,0M

Renewable energy and health & medicine sectors lead with medians of $5,9M and $5,8M, respectively. Software & IT follows closely with a median of $4,5M.

An unrealistic valuation can deter investors who see through the hype. Protecting an inflated valuation wastes time and energy. To build trust and attract the right partners, be realistic.

🤖 Quantitative example:

• Normal case: You raise $800,000 at a $3.2 million pre-money valuation (4x the raise).

• Too much: Raising $800,000 at an $8 million pre-money valuation (10x the raise) is excessive and unrealistic.

Overvaluing means investors get a smaller ownership slice. In the next round, you’ll need to inflate valuations further to keep current investors happy, leading to more dilution and making it harder to raise funds. It’s a vicious cycle that complicates future fundraising.

🐨 Seed rounds and valuations

Seed round sizes have steadily grown, maintaining resilient valuations. Across all sectors, Q1 2023 saw a median seed valuation of $12.9 million, slightly down from $13 million in Q4 2022. By Q4 2023, the median seed valuation across sectors was $14 million.

• Healthtech: Median seed valuation hit $16 million in Q4 2023, rebounding from $10.9 million in Q1.

• Consumer: Median seed valuation jumped 19% in Q4, but still below 2022 highs.

• SaaS & Fintech: Showed year-over-year increases but still below 2022 highs.

🌂 Quantitative example:

• Normal case: You raise $2.5 million at a $10 million pre-money valuation (4x the raise).

• Too much: Raising $2.5 million at a $20 million pre-money valuation (8x the raise) is excessive and unrealistic.

Investors end up with a very small stake, and the next round will further dilute them. This makes it harder to attract new investors unless you inflate the next round’s valuation even more, creating a cycle of unrealistic expectations and funding challenges.

🐣 How much equity to give away at early stages

Be strategic with your equity. In early rounds, aim to give away around 10%. Investors will likely want 20% ownership but avoid crossing 25%. Control is key.

🦕 Equity distribution examples:

• Pre-seed round: Raising $800,000 at a $3.2 million pre-money valuation would dilute existing shares by around 20%.

• Seed round: Raising $2.5 million at a $10 million pre-money valuation would dilute existing shares by 20%. Too much: If your equity giveaway results in more than 25% dilution, you’re giving away too much control.

• Too much: If your equity giveaway results in more than 25% dilution, you’re giving away too much control.