How Much Funding Should You Raise

Raising money isn’t just about how much you can raise. I mean, if it were just about raising, you could go for $10 million, too. But the real question is: How much funding should you raise for your startup?

Many founders mess up by either overspending on flashy offices and big teams or raising too little and running out of steam too soon. Both can kill momentum.

That’s why I always say fundraising isn’t about going too big or too small. It’s about finding the balance. And this blog will help you do just that.

I’ve broken down a step-by-step method so that you can figure out exactly how much funding you should raise, not just to survive, but to grow smart and strong.

So let’s dive in and find out what the right number looks like for your business.

Founders and overfunding vs. underfunding

Founders often face challenges when deciding how much money to raise. Some end up raising too much, while others secure too little, and both can create risks in different ways.

Let’s understand why this happens:

• Limited business experience: Many founders are navigating this for the first time, and funding strategy isn’t always straightforward.
• External pressure and market buzz: At times, investor expectations or industry hype can encourage raising more capital than necessary to make a deal seem larger or more attractive.
• Uncertain growth projections: Predicting how quickly a business will scale is tricky, and it’s easy to overestimate or underestimate future needs.
• Too many funding options: With various funding routes available, it can be difficult to choose the right type and amount for the specific stage and goals of the business.

Why is overfunding risky for your business?

Raising too much money might sound like a dream, but it can cause serious problems. Here’s why:

1) You may get comfortable soon

When there’s a big pile of cash sitting in the bank, some founders stop thinking like scrappy entrepreneurs. You may overspend on fancy offices, big teams, or unnecessary tools and forget what to prioritize.

2) You lose ownership too early

More money = more dilution.

You give away more shares than you need to. Later, when the company grows and you need serious funding, you already hold a smaller slice of your own pie.

3) It sends a bad signal to investors

If you ask for more than you need, it suggests you don't understand your business well. Smart investors will either back off or grill you hard in meetings.

Now, Underfunding isn’t better either. Let’s find out the reasons.

Why is underfunding risky for your business?

On the flip side, raising too little money can starve your business and stop it from growing. Here’s why this is just as risky:

1) You run out of money too fast

You burn through your cash in 6 months when you really needed 12–18 months to hit the next big milestone.

2) You raise again under pressure

Investors can sense desperation. If you’re low on funds and scrambling to raise, you’ll either get bad terms or no offers at all.

3) You lose momentum

Instead of focusing on building your product or growing your user base, you’re stuck fundraising all over again too soon. That kills energy for you and your team.

If over- and under-funding is risky, how do you avoid these traps? It’s about raising just enough to hit your next big milestone. Finding the balance is key. But how? Let’s find out in the next section.

How much funding should you raise?

It’s wise to raise enough to comfortably cover your burn rate, strategic expenses, and give yourself a 12-18-month runway. That usually means raising 1.5x or 2.0x of your projected expense.

Now, let’s break down how to figure out that exact number for your business:

Step 1: Know your business stage

Every startup is at a different point in its journey; some are just an idea, others have a product, and some are already making sales. The stage of your business determines how much money you need and what you’ll use it for.

I’ve seen founders mess this up by asking for millions when they’re still figuring out their idea or raising too little when they’re ready to grow fast. Can you imagine? Horrifying!

Hence, ask yourself: Are you still testing your idea, building your MVP, gaining users or revenue, or scaling big?

Why do these questions matter?

Because each stage has different priorities, which affect your costs.

By raising your funds strategically, knowing your business stage, you won’t waste money on things you don’t need yet, and investors will trust that you understand your business maturity.

Step 2: Be real with your burn rate

Your burn rate is how much money you spend each month to keep the business running—think salaries, rent, software, or marketing. If you don’t know this number, you’re driving blind.

I’ve seen so many founders lie to themselves about this, and then they run out of cash 6 months earlier than expected. According to the survey, 1 in 5 startups fail in the first year, with running out of money being the most common reason for failure.

Hence, before raising your funds, make a list of:

• Salaries (even your own, if you're paying yourself)
• Product development
• Marketing
• Office tools or rent
• Unexpected costs

Making note of such expenses, you’ll know exactly how much money you need to keep the lights on, avoiding the risk of running dry.

Step 3: Decide your timeline

Funding isn’t forever—it’s meant to get you to your next milestone, like launching a product or doubling your customers. Your timeline is how long you need the money to last, often called your “runway.”

If you don’t set a clear timeline, you might raise too little and run out of cash or raise too much and lose focus. Thus, to avoid the pitfalls of raising too little or too much funding, here’s what you should focus on:

• Set a milestone: Decide on a key business milestone, like what you want to achieve with the funding (launching your app, reaching $100,000 in sales, or hiring a key team member).
• Estimate the time: Work backwards to figure out how many months it’ll take to hit that milestone.
• Calculate funding needs: Multiply your burn rate by the number of months in your timeline, then add a buffer (e.g., 3–6 months) for delays.
• Be realistic: Things always take longer than you think. Talk to other founders to get a sense of timelines for similar businesses.

Focusing on your timeline keeps you funded and in control without any stress and depression.

Step 4: Include strategic costs

Beyond your basic expenses, you need money for “strategic” moves that give your business an edge, like hiring a star employee, running a proper launch campaign, or building a must-have feature. These costs can make or break your success, but founders often forget to budget for them.

So, list down what will take your business to the next milestone, is it:

• Hiring a sales head?
• Scaling paid ads?
• Launching in a new city? Add those numbers on top of your monthly burn rate.

Making proper note of such a strategic cost will not only help you raise the right amount but also show investors that you’re thinking beyond survival — you’re planning for growth.

Step 5: Access your needs, not wants

This is where most founders go wrong. It’s easy to get caught up in excitement or fear and raise too much or too little. Assessing your needs forces you to be honest about what you really need to succeed. You cannot raise money like kids grabbing candy.

Hence, you must ask yourself:

• What do I need to build and test the product?
• What do I need to acquire customers?
• What do I need to reach my next milestone?

Accessing your needs will benefit you in the following ways:

• You’ll feel confident you’re raising the right amount, reducing stress and mistakes.
• A well-thought-out plan impresses investors, making them more likely to fund you.
• You’ll avoid the pitfalls of overfunding (losing control) or underfunding (running out of cash).

Ready to raise funds?

Now that you know the steps to raise the right amount of funding, it’s time to put them into action. However, remember, funding isn’t just about money. It’s about timing, strategy, and purpose.

Don’t chase big numbers to impress, and don’t shortchange your vision either. Raise what you truly need to reach your next milestone with confidence.

Nevertheless, if you need help raising funds, get in touch with our business plan consultant. They can connect you with trusted SBA lenders in our network.

Moreover, our experts at Plangrow Lab can also help you craft a solid business plan, provide accurate financial forecasting, and design compelling pitch decks—all to boost your chances of getting funded.

Get in touch with our expert today!