How much should you raise in your seed round? Work backward from milestones

How much to raise at pre-seed or seed: define the milestones that make you fundable next, build a lean plan, add a buffer and explain the number clearly.

By Olufemi Palmer, Managing Partner & Founder

"How much are you raising?" is one of the first questions an investor will ask. It's also one many founders answer badly.

The usual answers are a round number that sounds right, whatever a friend's company raised, or as much as possible. None of these hold up when an investor follows with "why that amount?"

The right number comes from your plan, not from comparison. You work backward from what the company needs to achieve before it raises again, figure out what it costs to get there, and add a sensible buffer. Here's how to do that.

Start with the next round, not this one

Every round is meant to get you to the point where the next round is easier to raise, or where you don't need to raise at all.

So begin with a different question: what will need to be true for the company to be clearly fundable at the next stage?

For an early B2B company, those milestones usually involve some combination of:

- Revenue or customer growth showing a repeatable sales motion - Retention showing customers keep getting value - A product that has matured past early adopters - Key hires in place - A clear view of how you acquire customers and what it costs

Talk to investors who invest at the next stage and to founders who recently raised it. Ask what they look for. Then pick the two or three milestones that matter most for your company.

Build a lean operating plan to reach them

With milestones defined, build a month-by-month plan for getting there.

List what you need to do. Which hires, which product work, which sales and marketing activity, and in what order.

Estimate the timeline. Be realistic. Hiring takes longer than you expect. Sales cycles take longer than you hope. Products take longer than anyone admits.

Estimate the costs. People are usually the largest cost for early companies. Add tools, space, legal, accounting, travel and anything else you'll need. Be thorough. Founders consistently underestimate costs they haven't paid for yet.

Include revenue, conservatively. If you have revenue, include it, but use cautious assumptions. Plans built on optimistic revenue tend to run out of money early.

The result shows how much cash you'll burn to reach your milestones.

Add a buffer

Things will take longer than planned. They almost always do.

Add a meaningful buffer on top of your plan: extra months of runway beyond the date you expect to hit your milestones. This covers delays, and it gives you time to raise the next round from a position of strength rather than urgency.

Remember that raising itself takes time. If you'll need to start your next raise several months before money runs out, plan for that window too.

Sanity-check the number

Once you have a number, test it from a few angles.

Does it fit your stage? Talk to founders and investors who know your market. If your number is far outside what's typical for companies like yours at your stage, you'll need a strong reason, or you may need to adjust the plan.

Does it match your evidence? Investors fund plans in proportion to the proof behind them. A large raise with thin traction is a hard conversation. A focused raise with a clear plan is easier.

Does the dilution make sense? Raising more means giving up more ownership. Raising too little means running out before your milestones. Talk to your lawyer and advisors about what's reasonable for your stage before you commit to a number.

Can you raise it from your investor list? Consider the check sizes of the investors you're targeting. The number should be achievable with the people you can realistically reach.

Consider a range or staged plan

Some founders present a range, with what each end of the range achieves. For example, a hypothetical: "At the lower end, we reach [milestone A] and [milestone B]. At the higher end, we also [hire a second seller / expand to a second segment]."

This can work well, as long as both ends are tied to clear milestones and you're comfortable that the lower end is enough to reach the next stage. Be consistent. Changing your number between meetings undermines confidence.

How to explain the number

When an investor asks how much you're raising, give a confident answer in three parts:

1. The amount. "We're raising [amount]." 2. What it achieves. "That takes us to [milestones] over [timeframe]." 3. How it gets spent. "Mostly on [two or three key uses], with [X] months of buffer."

A hypothetical example: "We're raising [amount] to reach [revenue milestone] and prove our second sales channel over the next [number] months. Most of it goes to two engineering hires and our first seller, with a buffer of several months beyond our milestone date."

That answer shows you've thought it through, and it gives the investor something concrete to evaluate.

Common mistakes

- Raising too little to reach real milestones. You end up raising again before you have anything new to show. - Raising as much as possible without a plan. Extra money without discipline often leads to higher burn and weaker focus. - Copying another company's number. Their plan, market and evidence aren't yours. - Forgetting the time a raise takes. Plan for when you'll need to start raising again, not just when cash runs out. - Ignoring dilution. Understand the tradeoff before you commit.

A simple worksheet

Next-stage milestones: [Milestone 1], [Milestone 2], [Milestone 3] Months to reach them: [ ] Planned monthly burn, by period: [ ] Total burn to milestones: [ ] Buffer (months and amount): [ ] Expected revenue in the period (conservative): [ ] Amount to raise: [ ] Top three uses of funds: [ ]

The point

The right raise amount isn't a guess or a comparison. It's the cost of reaching the milestones that make your company fundable at the next stage, plus a sensible buffer. Work backward from those milestones, build a lean and realistic plan, test the number and explain it clearly. Investors will trust the number more, because they can see where it came from.

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