How do you make a realistic funding request?

3 Define your milestones

The third step to making a realistic funding request is to define your milestones. Your milestones are the specific goals and achievements that you plan to accomplish with the money you raise. They should be SMART: specific, measurable, achievable, relevant, and time-bound. Your milestones should also be aligned with your stage and your next round. For example, a pre-seed startup might have milestones such as validating the problem-solution fit, building the MVP, acquiring the first 100 customers, and hiring the core team. A series A startup might have milestones such as scaling the product-market fit, expanding the market, growing the revenue, and building the brand. Defining your milestones will help you justify your funding request and show the VC's how you will create value.

4 Research your valuation

The fourth step to making a realistic funding request is to research your valuation. Your valuation is how much your startup is worth before raising money. It is one of the most important and contentious aspects of fundraising, as it determines how much equity you will give up to the VC's. Your valuation is influenced by many factors, such as your stage, traction, market size, growth rate, competitive landscape, team quality, and VC demand. There is no one-size-fits-all formula to calculate your valuation, but you can use some common methods, such as the market multiple method, the scorecard method, the venture capital method, and the discounted cash flow method. You can also benchmark your valuation against similar startups that have raised money recently. Researching your valuation will help you negotiate your funding request and avoid unrealistic or unfair terms.

5 Communicate your ask

The fifth step to making a realistic funding request is to communicate your ask. Your ask is how much money you are seeking and what terms you are offering. You should communicate your ask clearly and confidently in your pitch deck and your presentation. You should also be prepared to explain and justify your ask with data and logic. You should avoid being vague, ambiguous, or hesitant about your ask, as this might signal a lack of conviction or confidence. You should also avoid being too rigid, arrogant, or unrealistic about your ask, as this might alienate or offend the VC's. Communicating your ask effectively will help you create a positive impression and a constructive dialogue.

6 Be flexible and open

The sixth and final step to making a realistic funding request is to be flexible and open. Fundraising is a dynamic and uncertain process, and you might face unexpected challenges, opportunities, and feedback along the way. You should be flexible and open to adapt your funding request to changing circumstances and new information. You should also be flexible and open to listen to the VC's perspectives, questions, and concerns, and to address them respectfully and professionally. You should also be flexible and open to explore different options, scenarios, and alternatives, and to find a win-win solution. Being flexible and open will help you build trust and rapport with the VC's and increase your chances of closing the deal.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?