Funded

Chapter 4. Structuring Your Raise

Now it’s time to take what you have learned so far about how financing works and start putting together a plan for your company.

In this chapter we will cover how you determine when is the best time to raise. We will go through what needs to get factored into the decision of how much to raise. And finally, we will determine the best legal structure for conducting your raise.

Timing Your Raise

Let’s talk about the factors you need to consider in timing your fundraise.

The decision to raise may be precipitated by a number of factors. Perhaps recent company growth leads you to conclude that your company is particularly attractive. Perhaps there is a particular market opportunity that you want to capture that requires more resources. These are great reasons to raise because they are all positive signals about the growth trajectory of your company, and they will put you in a strong negotiating position.

While raising simply because you are out of money is certainly a legitimate reason, it is not the best reason, and it doesn’t put you in a strong negotiating position with investors.

Let’s dive deeper into the five factors affecting when to raise.

Have at Least Six Months of Runway

Your company’s runway is the number of months of cash you have left in the bank. As much as it’s great to be idealistic about timing a funding round, there are some real limitations posed by your company’s runway.

You need to raise money before you reach the end of ...