Joakim Achrén helps founders build successful games companies. He’s investing in games through F4 Fund which he started in 2023, together with with David Kaye. To follow his work, subscribe to Elite Game Developers.One of the most critical aspects of fundraising that founders often get wrong? The answer to: “How much are you raising?”
Here’s what I’ve learned about this question after years of investing and advising startups.
- Be Precise, Not Vague
When a founder tells me they “need to raise at least $500K,” I immediately wonder: Why not simply say “I’m raising $500K”? Exact numbers signal you’ve done the math.
Even worse: “We’re looking to raise between $1M and $1.5M.” That’s a 50% range! This suggests you haven’t thoroughly planned your capital needs.
- What VCs Actually Evaluate
As an investor, when it comes to the amount you are raising, I primarily focus on:
- Your targeted monthly burn rate post-fundraise
- Your discipline in maintaining that burn rate
- Whether the amount gives you at least 18 months of runway
Why 18 months? Because we’re already thinking about your next raise. Contrary to what some founders might believe, especially first-time founders, VCs don’t expect this to be your last round. VCs want your company to grow significantly enough to raise again at a higher valuation. VCs only realize returns through exits when companies sell or IPO, and a nice business with dividends isn’t something that works for a VC fund.
- The Perfect Answer
“We’re raising $1.2M, which gives us an $85K monthly burn and 18 months of runway to hit our key milestones of achieving product-market fit, reaching $50K MRR, and expanding to three new markets.”
This answer demonstrates you understand capital efficiency, have realistic growth plans, and are thinking strategically about your business trajectory.
- Different Investor Mindsets
While VCs typically think about your next raise, angel investors might have different perspectives. Some angels may prefer sustainable growth toward profitability rather than raising multiple rounds, while others might prefer to own a significant share of the company (10%-20%) and then start making profit through dividends.
Why don’t dividends work for VCs? With VCs needing to return 3-5x their fund within 7-10 years, small dividend payments would never achieve these targets in the required timeframe. VCs want their capital working entirely inside companies to maximize valuation until a major liquidity event.
Final Thoughts on Valuation
The market sets the valuation, meaning it’s valuable for you as a founder to research what similar startups, at similar stages, with similarly talented teams are raising at.
Using our example: If you’re raising $1.2M and expecting 20% dilution at pre-seed (standard), then you might aim for $6M post-money valuation.
Remember that fundraising should be a dialogue. Don’t be the only one setting expectations about your company’s value. Ask investors for their perspective. The most successful fundraising conversations involve mutual exploration of value rather than one-sided proposals.