Working out the numbers behind a raise.

Karolina Kukielka, early stage Saas investor at InReach ventures joined us for a Q&A on fundraising numbers, including valuation, dilution, fundraise amount, and key metrics that demonstrate validation at seed. Here are some of her top tips,

• Consider your ownership expectations for your seed round, work out what % of your business you’re prepared to hand to investors, and how much money you want to raise to hit your next milestone (Series A). 
  • Remember, ideally dilution should be kept to 15-20% per round
  • Keep in mind that most VCs will want a minimum of 7-10%, so to have two on your cap table you’re already at 20% before you’ve thought about strategic angels, etc
  • If you end up handing over 20-30% of your company, raise a larger round, or make sure it’s because the investors can add real value with their network (i.e. they are signal investors).
  • Look at your ownership expectations (i.e. 20%) and the amount of investment you need to get to the next stage (i.e. £2m), this will inform valuation (in this case £10m post money). 
  • As a benchmark, at seed, most fundraises are between £1-3m
• Product-market fit is what you’re working towards, but seed investors understand you need more resource to hit it, so won’t expect you to have signs of PMF at this stage. £10k MRR for a Saas business is a good benchmark to have in mind for B2B companies going to raise their Seed.
• Your team should have ‘founder-market fit’. Ideally this includes both in-house tech capabilities and someone who investors are confident can scale the business (remember, they’re investing in a business, not a product). Demonstrating previous startup exits, experience running businesses, or experience in the industry you’re selling into can help you build that trust.
• Want to demonstrate your experience in an industry? Show off your domain expertise with content, investors often turn to LinkedIn and find startups to invest in. Spend time on LinkedIn talking about your industry, show that you understand pain points, and use LinkedIn for outreach.
• Considering reaching out to investors about a bridge round? Bridge round’s are usually there because you’re missing something and you need more time/funding to get it ahead of your next raise (e.g. users, revenue). VCs know this and sense the risk, so won’t tend to invest. Use your current investors to fund your bridge, as they have a vested interest in your success. Hold off on new investor outreach for your next round when you’re set up for a successful fundraise.

Watch the full video of Karolina’s talk here.