"What valuation should I raise at?"

I've helped hundreds of founders fundraise and I've invested in over 150 startups.

Founders often come to me to figure out how much to raise and at what valuation.

Instead of a blog post, I built an interactive application that blends a calculator with the advice I give founders on how to approach this.

Step 0: Introduction

If you only take one thing away from using this app, let it be this:

Valuations aren't picked out of thin air — they are largely based on the relationship between...

Contrary to what you see in the tech news, fundraising is rarely easy. That said, it can be much less painful if you have a solid team going after an excellent opportunity and are raising the right amount of money at the right level of dilution for your stage.

Before using this tool, I never thought about how valuation is just an output of 1) money needed and 2) expected dilution, even though it's super obvious when stated.

So now I feel like I don't have to worry about valuation — just focus on the inputs.

This app will help you focus on the inputs (raise and dilution amounts) to determine your valuation.

Step 1: Raise Amount ($)

The first step is to choose the range of money you think would be good to raise.

While you might have an exact number in your head that you think is perfect, it's good to think about the minimum you'd need to accomplish your next milestone.

Select your range (you can change this later):

Step 2: Round Dilution (%)

The amount of dilution your company takes on each round is more heavily influenced by what is standard for the market at any given time — not your personal preferences.

Unless you are raising a tiny amount of money relative to what is typical for your stage or you're one of the hottest companies raising, the standard dilution per round ranges from 15% to 20%.

Select your range (you can change this later):

3) Post-Money Valuation ($)

Based on your inputs, we've generated a valuation range

If the valuation range seems surprisingly large to you, that is OK. It might need to be refined — we'll do that in the following steps.

The conventional advice you might have heard about fundraising is to pick a valuation and then tell potential lead investors that is what you're raising at.

It turns out that the more effective way to fundraise is to give lead investors a range in terms of both raise amount and dilution.

Doing this enables prospective leads to determine where they want to land regarding investment amount and ownership while falling within your set parameters. If you get multiple term sheets it also enables you to get a range of offers to compare and contrast.

Due to this, you'll likely tell a VC (conversationally — not in written materials like a deck) something like this:

Don't immediately close this tab now and start telling investors that — we should do more to hone in on this in the next step. If your range is larger than $500k raise and 3% dilution you'll likely want to tighten this further.

Valuation range will be displayed when you fill in the fields above.

Step 4: Valuation Scenarios

⬆️ High Raise, ⬇️ Low Dilution

A less likely outcome — especially so if dilution is <10%. While alluring, low dilution/high raise can sometimes come at the cost of working with the best longterm partners.

  • More runway, less dilution
  • You might optimize for dilution over over the best partners
  • Higher valuation "hurdle" to jump over for the next round
  • Can take longer to raise (if successful)

⬆️ High Raise, ⬆️ High Dilution

One of two more likely "good" outcomes. In this scenario you raise a lot (more runway) and dilute yourself a bit more.

  • More runway, standard dilution
  • Can optimize for best partners
  • More room to include value-add angels
  • On the higher end dilution-wise but as long as you followed the guidelines it's not extraordinarily high either — it's pretty standard.

⬇️ Low Raise, ⬇️ Low Dilution

One of two more likely "good" outcomes. When you raise a smaller amount you can often avoid high dilution.

  • Might be the fastest permutation to raise if you put in the proper preparation (deck, crm, etc)
  • Keeps you on the low end of dilution while still giving sufficient runway to achieve your next milestone.
  • Less money means less room for error. Make sure it's sufficient funding to get you to the next stage.

⬇️ Low Raise, ⬆️ High Dilution

The least-ideal outcome. It's better to optimize for one of the other three scenarios.

  • Sufficient money and acceptable dilution.
  • If you make progress after it should be relatively easier to raise an up round.
  • Low end of what you think you'll need to hit next milestone and fairly dilutive.