Fundraising and investor relations

Capital is bought, not received, and the terms matter more than the headline number. So does what happens for the years afterward, which is where most of the relationship actually lives.

Financing terms have legal and tax consequences that vary by structure and jurisdiction. Get qualified counsel and your accountant on any instrument before signing.

Decide the amount from the plan, not from the market

Raise against what the money buys: the milestones that will make the next raise possible, plus enough runway to reach them and to be wrong once. Working back from milestones gives a number you can defend and a story that connects the raise to the outcome.

Raising more than the plan needs is not free, it costs dilution now and sets a valuation you have to grow into. Raising too little is worse, because running out mid-plan is the weakest possible negotiating position and everyone on the other side of the table knows it.

Understand what the terms cost, because valuation is the least of them

A high valuation with punishing terms is worse than a lower one with clean terms, and founders routinely trade the second for the first because only the first is quotable.

• Liquidation preference determines who gets paid first and how much before common shares see anything. A participating preference or a multiple can mean an apparently good exit returns little to founders and staff.
• Anti-dilution decides what happens if the next round is lower. The broader forms can shift ownership substantially in exactly the circumstances where you can least afford it.
• Board composition and protective provisions determine what you can do without asking. This is control, and it is permanent in a way valuation is not.
• Option pool sizing placed before the investment dilutes existing holders only. Where the pool sits in the calculation is a real price negotiation dressed as an administrative detail.