Sat, May 17, 2014

# Know Why You’re Asking for Money

There is something crazy happening: I find myself in meeting after meeting with entrepreneurs who ask my advice for their funding strategy. And they often begin with: “I want to raise X amount of money.” When I ask the entrepreneur what they need the money for, how they intend to spend it, what they want to achieve with this particular amount and why X and not Y dollars — they fumble.

Turns out: They haven’t really thought this through. They just picked a number which sounded good and inline with what they read on TechCrunch and justify it with a tiny bit of top-down validation.

Here’s some fundraising 101: First figure out **what you actually want to build**. Then determine what that means in terms of your company: How do you break this goal down into **the smallest subset of the problem you can usefully solve**. Now you determine **how much money you need for this** (and possible additional iterations which you can plan for today). Bonus for doing some analysis around: **What would we do differently if we had more money? Less money?**

Then, and only then, do you have an idea how much money you need to raise.

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