HQQA010 How much do you want to raise at your next round?

What they mean

Let’s face it. If you get to the point that investors are asking questions like this, they are more out of genuine interest than of being out of a sneaky nature. You won’t get asked this if the investor isn’t making the cog wheels in their head tick over. It’s a consideration, not a selling point. But don’t wimp out. It’s yours to lose now.

You can, of course, turn it around and reply ‘How much do you think we should be raising?‘ I think it is fair game to put investors on the back foot if that is your personality. Only do that if you sense a little weakness!

Your answer informs them as to the scale business you want to build and whether they are able to participate in the next round. It is also insightful as to how aggressive you are.

Investors are asking questions to reconcile a question that pertains to themselves, not always out of your beneficial interest. So when you get asked a question, pause. Why are they asking a question? What do they want and need to hear? Do not think about yourself.

There are three ways you could play this:

Monster play: We are shooting for the moon. We have our shit together and want to grow fast as we know how to spend it (You probably don’t if you haven’t done it before). This appeals to a lot of people who are running the go big or go home playbook.
Profitable play: We don’t need to raise big money. We believe we can build a nice profitable business and grow with cash. This will suit some investors, but not all.
Middle of the road: You will raise reasonable money if there are fair terms, but otherwise you want to build a reasonable business, which might not be a rocket ship. This may not appeal to anyone, but it may be the reality for most.

What you need to say

“We like to take things one day at a time. Clearly, this series-a is a large milestone for us and we have a lot of work to get down to for us to scale up as planned. We have set out our milestones for the next round and our target is to be at $12 million ARR.

Assuming we hit that, it should be quite reasonable for us to raise $30 million, assuming that the investment environment does not change. This is similar to the raises we have seen our competitors raise at this stage of business.”