It’s one of the most common questions I get: “How do I know how much I should raise?”

And while there is some (simple) math involved, calculating your funding needs is easier than you think.

On the flipside, one of the worst answers you can give? “We are flexible, we’ll accept as much as the VC is willing to give”

If you don’t know how much you need and why, how can investors trust you to spend their money wisely?

Here’s what you need to do, step-by-step:

Step 1: Start with Your Goals (Not the Money)

Before you think about valuation or dilution, ask yourself: Where do I want this company to be in 18–24 months?

That’s your funding timeline. Less than 18 months and you risk running out of cash too soon. More than 24 months and you’re diluting yourself too early for capital you don’t need yet.

Your goals should be specific:

Revenue targets (e.g., “Reach €1M ARR”)
Product milestones (e.g., “Launch v2 with AI features”)
Market expansion (e.g., “Enter 3 new European markets”)
Key hires or regulatory wins

I’ve seen founders skip this step and jump straight to “we need €2M” without being able to explain what that money will actually accomplish. Don’t be that founder.

Step 2: Estimate the Related Costs

Once you have your goals, break down what resources you’ll need to achieve them.

Here’re are some example costs to consider:

Team: Founders, developers, sales reps, marketing, support

Marketing: Paid ads, events, content, tools

Product: Design, freelancers, integrations, platform costs

Software Tools: CRM, analytics, dev tools

Admin & Legal: Accounting, legal, office

Compliance/IP: Certifications (GDPR, SOC2, etc.,FDA…)

Now map these costs month by month across 18–24 months. You don’t hire 10 people on Day 1, right? Build a realistic hiring plan. Same goes for the other expenses.

Step 3: Estimate Your Revenue (The Tricky Part)

This is where it gets tricky. All VCs know that the revenue targets are always wrong. But it’s still a necessary exercise.

Here’s the big warning: as you’re calculating your funding needs, do not overinflate your revenues. Be realistic, even conservative, especially in the first 12-18 months.

Why? Because overinflating your revenue projections will make it look like you need less funding than you actually do. Then you’ll run out of money before hitting your milestones.

Step 4: Calculate Your Funding Ask

Now we put it all together with a simple formula:

Where:

Total Costs = Everything you'll spend (OPEX + CAPEX)
Gross Profit = (All expected revenue over the period) - COGS
Buffer = 10-20% on top to cover unexpected costs

Let me illustrate this through an example:

Imagine you're building a B2B SaaS platform for HR teams. Your goals for the next 20 months are to launch your mobile app, and expand from Germany into France and the Netherlands.

Here's your cost breakdown:

R&D: €380k (1 senior dev, 2 junior devs, contractors for mobile app)
Sales & Marketing: €520k (2 sales lead, 2 BDR, marketing manager, paid campaigns across 3 markets, events)
G&A: €150k (operations, legal setup in new markets, accounting, compliance)

Total costs: €1,050k

Based on your growth trajectory and expansion plans, you expect to generate €280k in gross profit over these 20 months (being conservative with the ramp-up in new markets).

Net burn = €1,050k - €280k = €770k

Add a 15% buffer: €770k × 1.15 = €885k

Round up for a clean ask: You need €900k

That's it!

Step 5: Set Your Valuation

First, let’s quickly define the key terms:

Dilution: How much of your company you’re selling in this round (as a %)
Pre-money valuation: What your company is worth before the investment
Post-money valuation: What your company is worth after the investment

I've also written a Linkedin post on that topic, if you wish to check it out.

Now that you know how much to raise, how do you set a valuation?

When I was starting out in VC, I thought the way to go was via complex DCF (Discounted Cash Flow) models or revenue multiples. The reality for pre-seed and seed companies is quite different. The only important thing to know is how much dilution is typical for your stage.

And at pre-seed and seed stages, founders typically give up 10–20% equity per round. Use that as your starting point.

The formulas:

Post-money valuation = Amount to raise ÷ Expected dilution

Pre-money valuation = Post-money valuation - Amount raised

Using our HR SaaS example:

Raise: €900k
Dilution: 15%
Post-money valuation: €900k ÷ 0.15 = €6M
Pre-money valuation: €6M - €900k = €5.1M

Important: Always clarify whether you’re discussing pre-money or post-money valuation, because the difference comes out of your pocket.

Final tip: Check what’s trending now for your industry. Go to Perplexity, ChatGPT deep search, or whatever tool you prefer, and research recent deals in your stage, geography, and sector to understand where you should fall in the range.

Common Mistakes I See

Asking for “as much as possible”: More money early = more dilution you can’t get back.

Giving a wide range: “We’re raising €500K to €2M” sounds like you don’t have a plan.

Ignoring the 18–24 month rule: Raising for 12 months? You’ll be fundraising again before you know it.

Obsessing over valuation instead of finding the right partner: A few percentage points of dilution matter far less than having an investor who actually helps you succeed.

The Real Goal

Raise to achieve your goals, and cover the related costs. And find the right partners in the process.

So do the work. Run the numbers. And go into those conversations prepared.

And before I let you go, I just wanted to share a few totally unrelated articles I read last week and found pretty cool: