When to raise and how much

Northwind Labs has $600,000 in the bank. Its founders, Ada and Ben, want to raise a seed round. They must answer two questions. How much do they raise? And when do they start? The first answer decides how much of the company they sell. The second answer decides if the money arrives before the cash ends.

Most founders answer with a number from a headline: “Companies like ours raise $3M.” That number tells you nothing about your company. This lesson gives you a method that starts from your own plan.

Start from the milestones, not from the money

A round buys time. The founders use the time to reach a milestone: a measurable result, such as revenue, users, or a product launch. The next investors pay a higher price only for those results. Michael Seibel of YC wrote it plainly: “A financing round is not a milestone. It is literally cash.”

Thus the first question is not “How much can we get?” The first question is “What must be true at the next round, and how long does it take?” In October 2026, a Crunchbase News article quoted one Series A investor who wants to see $2M to $3M of ARR, and sometimes $4M. Your milestones depend on your market. Write them first, before you calculate anything.

When Ada and Ben write their plan, they get three facts:

• Northwind must reach the Series A milestones in approximately 24 months.
• To do that, they must hire, and the team increases to five persons.
• With the new team, the net burn is $125K each month.

The amount: net burn × months × cushion

Net burn is the cash that a company spends each month minus the cash that comes in. It is the amount by which the bank balance decreases. Northwind plans five persons at $20K each per month, with all costs included, plus $25K for tools and rent. Its net burn after the round is $125K.

Amount to raise = Net burn after the round × Months × (1 + Cushion)
$3.6M           = $125K                    × 24     × 1.2

The cushion is extra money on top of the plan. Plans take longer than founders expect, and the burn usually increases when you hire. Northwind adds 20%. Thus it raises $3.6M, not $3.0M.

Use your own salaries in this formula. The 2016 YC seed guide used approximately $15K per engineer per month, with all costs included. That number is out of date, and your costs depend on your city and your team.

How many months? More than you think

For years, the rule was a new round every 18 to 24 months. The 2016 YC guide used 12 to 18 months. Carta’s Peter Walker now calls the 18-to-24-month advice “getting stale”. Before you read his data, make a guess.

Predict first

Carta measured the companies that raised a Series A in 2025. What was the median time between their seed round and their Series A, in months?

Type a guess before you continue. A guess first, even a wrong one, makes the answer easier to remember.

Your guessSave my guess

The lesson from this data is clear. Plan for 24 months or more, or for a path to profit. A company with no cash after month 18 often must raise a bridge round. A bridge round is more money from the current investors, before the next primary round. The lesson on bridges and extensions shows how bridges work.

When to start: calculate from the last month of cash

A raise takes months, not days. In 2024, DocSend found that most successful seed rounds closed in 12 weeks or less. In its 2023 data, half of the successful seed raises took 13 to 24 weeks. In each year, a raise took months. Thus you must start the raise long before the cash ends. Start from the end and subtract:

Start month = Month the cash ends − (Months to raise + Safety buffer)
Month 2     = Month 12            − (4               + 6)

Northwind spends $50K each month today. Its $600K lasts 12 months, so the cash ends in month 12. Ada and Ben expect 4 months to raise, and they want a safety buffer of 6 months in case the raise goes slowly. Thus they must start in month 2, when 10 months of cash remain. One 2026 guide gives the same rule in a simpler form: start when 9 to 12 months of cash remain.

Runway is the number of months until the cash ends at the current net burn: cash ÷ net burn. The lesson on burn and runway shows how revenue growth changes it.

The planner below does the two calculations at the same time. It shows the cash fall, jump at the close of the round, and fall again until the next raise. Change the net burn after the round, and watch the start of the next raise move.

Planner

How much to raise, and when to start

Set the net burn after the round and the months that it must last. Then set your cash today. See the raise and the month to start.

How much to raise

Net burn per month after the round

Include the people that you plan to hire.

Months the money must last

24 months

Cushion on top of the plan

0%10%20%30%

When to start

Cash in the bank today

Net burn per month today

Months to raise

4 months

From the first pitch to the money in the bank.

Safety buffer

6 months

Cash left in reserve if the raise goes slowly.

Amount to raise

$3.6M

$125K × 24 × 1.2

Start this raise

Month 2

10 months of cash left

New runway

31.2 months

at $125K a month

Start the next raise

Month 27.2

10 months before the cash ends

Cash in the bank, month by month

Start the raise in month 2, while 10 months of cash remain. The round closes in month 6 with $300K left, and $3.6M comes in.

At $125K a month, the cash lasts 31.2 months after the close. That gives you 25.2 months from this close to the next one. That is more than the median wait of approximately 25 months from seed to Series A (2025, Carta).

Paul Graham gives one more reason to start on a fixed date. In his words, “a startup should either be in fundraising mode or not.” A raise takes all of the founders’ attention, so do it in one short period. Then go back to work on the company.

Worked example · step 1 of 7

Northwind's raise plan, step by step

1. 1

   Net burn after the round

   Five persons at $20K each per month, plus $25K for tools and rent.

   5 × $20K + $25K = $125K per month

Show step 2Show all steps

Work it out

Kestrel Robotics plans a net burn of $80K a month after its round. It wants 24 months plus a 25% cushion. How much must it raise?

Your answerCheck

Work it out

Kestrel has $900K in the bank and a net burn of $60K a month today. A raise takes 4 months, and it wants a 5-month buffer. In which month must it start the raise?

Your answerCheck

The price of time

Each dollar that you raise sells part of the company. The investors’ share is the new money ÷ the post-money valuation. Thus each month of runway also has a price in ownership:

Cost of one month = Net burn ÷ Post-money valuation
0.625%            = $125K    ÷ $20M

At a $20M post-money valuation, Northwind’s $3.6M sells $3.6M ÷ $20M = 18% of the company. That is 28.8 months of net burn at 0.625% each. At a $40M valuation, each month costs half as much. This is why founders care about the valuation: it sets the price of their time.

The YC seed guide gives a limit: “most rounds will require up to 20% dilution and you should try to avoid more than 25%.” Paul Graham gives the same 25% limit for the seed round. Dilution is the decrease in the founders’ share when the company sells new shares.

Calculator

What one month of runway costs

Each month of runway is money that you raise, and each dollar that you raise sells part of the company.

Net burn per month

Months of runway

24 months

Post-money valuation

$20M

For a round on post-money SAFEs, use the cap.

Amount to raise

$3M

$125K × 24

You sell

15%

$3M ÷ $20M

One month costs

0.625%

of the company

Ownership after the round

• Owners before the round
• New investors

At a $20M post-money valuation, each month of runway costs 0.625% of the company. 24 months cost 15%.

That is inside the 20% that the YC seed guide calls normal for most rounds.

Too little and too much

The two errors have different costs.

If you raise too little, the cash ends before the milestones. Then you must raise again from a weak position, often as a bridge from your current investors. Peter Walker of Carta calls the belief that investors always fund a bridge “risky”.

If you raise too much, you sell more of the company than necessary. A very high valuation also sets a high bar: the next investors must agree to an even higher price. More money can also make you spend too fast. Paul Graham wrote: “Hiring too fast is by far the biggest killer of startups that raise money.”

What if investors offer more than the plan?

First, calculate the cost: more money at the same valuation sells more of the company. Then ask what the extra money buys. If it buys a faster path to the milestones, it can be worth the dilution. If it only makes the burn larger, it is expensive comfort. The lesson on how valuations are set shows how the amount and the percentage together set the cap.

Quiz · question 1 of 5

Test what you learned

Your net burn is $100K a month. You want 24 months of runway plus a 20% cushion. How much must you raise?

• A$2.88M
• B$2.4M
• C$4.8M
• D$2.0M