How Much to Raise Fund and at What Valuation

01How Much to Raise: The 18 to 24 Month Runway Rule

The cleanest way to decide how much to raise is to start from runway, not from a number that sounds impressive. The working rule is to raise enough for 18 to 24 months of runway. That window is long enough to hit the milestones that justify your next round, with time left to actually run the next raise (which itself takes four to eight months).

Why not raise for less? Because a 12 month round leaves you back in the market almost immediately, often before you have the proof points to command a higher price. Why not simply raise as much as possible? Because an oversized round at a stretched valuation sets a bar you then have to clear, and raises the risk of a flat or down round later. The 18 to 24 month band is the balance most founders should aim at.

02Building the Number Bottom-Up

Once you have a runway target, build the amount bottom-up so you can defend every rupee in the room.

• Start with monthly burn: your expected net cash outflow per month over the period, not today’s burn frozen in time.
• Multiply by the runway months: burn times 18 to 24 gives your base requirement.
• Add the milestone costs: the specific hires, product, and go-to-market spend needed to reach the next round’s proof points.
• Add a buffer: a cushion on top, because the next raise takes time to land and plans slip. Sizing to the perfect case is how founders run out of road mid-raise.

This bottom-up number, tied to clear milestones, is far more convincing to investors than a round figure picked because peers raised it. It also tells you the real cost of your plan, which is useful well beyond the fundraise.

03How Much Dilution Is Normal

In India, founders typically get diluted 20 to 30 percent in each round. The number is not mysterious: it is simply the amount raised divided by the post-money valuation. Raise ₹6 crore at a ₹24 crore post-money and you have sold 25 percent.

The reason to respect this band is that dilution compounds. Give away 30 percent at seed, another 25 percent at Series A, and you are well below half the company before the business is truly proven, with more rounds still to come. Founders who concede too much early often find there is little ownership left to motivate the team or to survive a few more rounds. If an early round is asking for much more than 30 percent, treat it as a warning sign and understand why.

04The ESOP Pool Trap

This is the part of the deal founders most often miss, and it quietly costs them ownership. Investors usually ask for the ESOP pool to be created or topped up before the round. The reason is commercial: when the pool is created pre-money, it comes out of the existing shareholders’ slice, so the dilution falls on founders and existing holders, not on the incoming investor. If the same pool were created after the round, everyone, including the new investor, would share that dilution.

You will not avoid having an option pool, nor should you, since you need it to hire. But you can negotiate its size and timing. The practical move is to keep the pool small at this round, around 5 percent, sized to the hiring you will actually do before the next raise, rather than agreeing to a large pool up front. The pool can then be topped up towards the typical 10 to 15 percent in future rounds, when you genuinely need it, and the dilution is shared more broadly.

05How Seed Valuation Is Actually Set

Founders expect a precise valuation at seed. The reality is that a seed round is often not priced at all. Instead of fixing a number when there is little revenue to anchor it, the round is raised on a convertible instrument that converts into shares at the next priced round. This defers the valuation argument to a point where there is more evidence.

The convertible carries a discount, typically 20 to 35 percent, to the price of the next round, usually combined with a valuation cap. The discount rewards the seed investor for backing you earlier and at higher risk: their money converts into shares at a lower price than the new investors pay. So the negotiation at this stage is often about the discount and the cap, not the valuation itself.

If you do price the seed round, it is set far more by negotiation, traction, team and investor appetite than by any formula. The most useful anchor available is revenue multiples, covered next. Whichever route you take, the instrument and its terms matter as much as the number; understand them in SAFE vs CCPS vs convertible notes in India.

06Revenue Multiples and Comparables

When a round is priced and you do have revenue, the most practical anchor is the industry revenue multiple. The idea is simple: find out what comparable companies (your competitors and close peers) are valued at relative to their revenue, derive the multiple, and apply a similar multiple to your own revenue to triangulate a defensible range.

For example, if peers in your space are valued at roughly 8 to 10 times revenue, and your annual revenue is ₹3 crore, that points to a rough enterprise value in the ₹24 crore to ₹30 crore zone, before adjusting for your growth, margins and stage. The multiple is a starting point, not a verdict: faster growth and better unit economics earn a premium, and a thin or shrinking top line earns a discount.

This comparables approach does two things. It helps you understand what your competitors are valued at and at what revenue, and it gives you an evidence-based way to value your own company in the negotiation, rather than picking a number from the air. For the underlying mechanics of pre-money, post-money and how the multiple turns into a share price, see pre-money versus post-money valuation.

07A Worked Example

Suppose your monthly burn is expected to average ₹25 lakh, and you want 20 months of runway.

Now the ESOP catch: if the investor wants a 5 percent pool created pre-money, that 5 percent comes out of your ₹18 crore pre-money, so your effective valuation is lower than the headline. Push for a 10 percent pool and the cut is larger still. This is exactly why the pool size and timing are worth negotiating.

08Frequently Asked Questions