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Learn how to calculate your raise amount, choose between SAFEs and priced rounds, and navigate term sheets strategically.
Mark Bugas
The size of your round should come directly from your financial model – it's the capital needed to hit specific milestones that unlock your next round, plus some additional breathing room.
Here's how to think about it: Work backwards from where you need to be for your next raise. If you're raising Seed today, you need to know exactly what Series A investors will expect to see. As of Q4 2025, the average ARR of a B2B SaaS company raising their Series A is $2M - $3M in annual recurring revenue. Your financial model should map out the exact path to get there.
Let's make this concrete. Say your model shows you'll burn $200K per month post-raise and need 18 months to reach your target of $2.5M ARR. $200K × 18 months = $3.6M. Add a ~25% buffer because your assumptions will be wrong. Instead of $3.6M, you could aim for a $4.5M raise.
This approach ensures you're never fundraising with your back against the wall (which creates downward pressure on valuation and makes it harder to get a round done). It also signals to investors that you understand the path of a venture-backed company, which is a very specific one. You're not just picking a number out of thin air, you're showing a credible path to the metrics that matter for your next round.
The key is specificity. Show exactly how the proceeds translate to a P&L that gets you to $2.5M ARR and a Series A. That's how you build investor confidence and raise what you actually need.
This has changed a lot over time. As of October 2025, we’re seeing Series A’s for B2B SaaS companies get done at $2M - $3M in ARR. Traction expectations are likely higher for consumer startups and lower for capital intensive hardware or deep tech startups. Enterprise software companies might unlock Series A at just $500K ARR if they have multiple Fortune 500 customers and top quartile net revenue retention. Revenue is just one metric, and not a good proxy for Product Market Fit which is what really matters. As you can see, there is no perfect answer, so it’s worth speaking to Series A investors and founders in similar companies (same business model, vertical, stage, etc).
Add a ~25% buffer beyond your calculated needs to account for unexpected market downturns, worse-than-expected performance, and growth initiatives requiring more capital. It’s always worth securing the additional runway. As many founders and investors say, CEOs have one job: don’t run out of money. The longer you have in market, the more shots you have on goal, and startups are an endurance game. This buffer also provides future negotiating leverage as you’re less likely to raise from a point of weakness.
As Carta’s data and SaaStr’s recent blog post show, the common “wisdom” that deals don’t get done in the summer is actually a myth.
Assuming you’re not profitable, you will have to find an alternative form of financing or raise a "bridge round". Bridge rounds are sometimes done at flat valuations, lower valuations vs. previous rounds, or with “structure”, that is unfavorable terms like liquidation preferences or board control provisions.
However, the stigma related to bridge rounds may be waning as they’ve grown in popularity from 2023-2025, driven by the lack of liquidity in the M&A and IPO markets.
Alternative financing, including revenue-based financing (selling future revenue) or asset-based financing (loan against accounts receivable, inventory, or another asset), have increased in popularity over the past decade as founders seek alternative, non-dilutive forms of capital. Both types of financing are generally available to slightly later stage companies, often with $1M+ in revenue.
We usually aim for 18-24 months. Anything longer and you’ll be tempted and perhaps expected to accelerate spend. Anything less and you run the risk of not having enough time to get to a meaningful milestone. Always build in a buffer.
Carta’s quarterly “State of Private Markets” reports cover round size, valuation, and dilution benchmarks by stage and sector. It’s worth subscribing to their newsletter “Carta Data Minute”, which contains further insights such as valuation benchmarks by SAFE size, convertible note vs. SAFE usage at pre-seed and seed, and much more.
PitchBook and CB Insights offer detailed comparables but require paid subscriptions (CB Insight’s lowest tier runs $2,400 per year while a Pitchbook license costs somewhere in the ballpark of $20,000 and is primarily used by funds). CB Insights offers a great 10-day free trial, so if you frontload your valuation research you’ll be able to complete all the benchmarking work you need for at least one round.
Flowlie’s platform includes composite benchmarking based on proprietary market data and reports from others such as Carta and Pitchbook, comparing the round you’re planning to thousands of others. This can be found in the “Round Planner”, along with a runway calculator, dilution calculator for up to three rounds, and your funding history.
CB Insights and Pitchbook are the best resources, and the former offers a 10-day free trial during which time you can search for companies by name, check if they have valuation information available, and look at similar companies to expand your research. CB Insight’s valuation data comes from companies directly, state filings or news, VentureSource, or are estimated using a comparable valuation model. Pitchbook’s data likewise includes a combination of company submissions, state filings, public resources such as the SEC’s Edgar System and estimates (full breakdown here)
Throw out or separate deals from your analysis that are outliers. It may help to discount valuations from 2021's peak and apply to a premium to rounds raised in 2023. Also be sure to adjust for geography. Bay Area startups command significant premiums to the rest of the country. Larger, blue chip funds like a16z, Khosla, and Sequoia are investing in $100M+ AI seed rounds, which skew market averages.
Pitchbook and CB Insights have good coverage of round size and valuation data. Carta has excellent market-wide and benchmarking insights. For international data, use Tracxn (Asia) or Dealroom.co (Europe).
OpenView & ChartMogul publish SaaS benchmarks free online, covering growth rates, retention, and financial metrics by company stage. Bessemer Venture Partners' "State of the Cloud" report provides detailed vertical-specific benchmarks. SaaStr's annual survey includes data from 1000+ SaaS companies. DealRoom provides private and public revenue/EV multiple data.
SAFEs eliminate maturity dates and interest rates, removing pressure to convert or repay by a specific date. If you’re early stage and don’t have a clear line of sight to a price round, a Convertible Note could accrue interest for years, making it an expensive instrument. SAFEs are simpler (5 pages vs 20+ for notes), cheaper to execute ($0-2K vs $10-25K legal fees), and more founder-friendly with no debt obligations on your balance sheet. The only advantage of convertible notes is familiarity for traditional investors – but post-2020, even East Coast VCs have embraced SAFEs.
Priced rounds establish a specific company valuation and issue new shares at that price, requiring board approval and, depending on the round size, anywhere from ~$25k - $100k in legal fees. Unpriced rounds (SAFEs or convertible notes) delay valuation until the next priced round and cost much less to execute. Priced rounds make sense for Series A and beyond; unpriced instruments dominate pre-seed and seed rounds.
Some rules of thumb: do a priced round when raising over $3M, bringing on institutional investors who require board seats, or when your valuation exceeds $50M (where small SAFE cap differences mean millions in dilution). International investors often prefer priced rounds due to tax treaties.
What valuation cap should I put on my SAFE?
Carta has great resources on valuation caps by SAFE size and round. Generally speaking, the more you raise the higher the accepted valuation to preserve startup ownership.
Standard SAFE discounts range from 10-20%, with 20% being most common for seed rounds. Earlier stages (pre-seed) might offer 25-30% discounts. Larger rounds ($2M+) can negotiate down to 10-15%. 20% is far and away market standard though. High-conviction investors may accept no discount with just a valuation cap. The discount rewards early risk-taking – balance investor incentives with minimizing dilution.
Go beyond TAM slides with nuanced market insights: identify underserved segments, explain why previous attempts failed, and articulate non-obvious market timing factors. Include primary research: customer interviews revealing specific pain points, analysis of competitor churn reasons, or regulatory changes creating new opportunities. Show thought leadership through published content, speaking engagements, or advisory positions in industry organizations.
Sophisticated strategies balance multiple objectives beyond just raising capital: minimizing dilution, building strategic investor syndicates, maintaining board control, and preserving optionality.
Reference specific portfolio companies from their fund that demonstrate pattern recognition. Understand their fund dynamics: fund size, typical check size, ownership targets, and where you fit in their portfolio construction. Know their partners' backgrounds and investment theses.
This shows conviction while leaving room for negotiation.
Yes, but at the right level of detail. Break down into key hires, growth initiatives, and product priorities. Prepare a detailed 18-month hiring plan and budget for diligence, but don't overwhelm the pitch with minutiae. Show you've thought through the plan but maintain flexibility to adapt based on market conditions.
Extremely specific for key hires, directionally accurate for others. Name specific VP-level candidates you're recruiting, their background, and hiring timeline. For broader hiring: "We'll build a 5-person SDR team in Q2, scaling to 10 by Q4."
What if an investor wants to give me more money than I'm asking for?
First understand their motivation – are they trying to own more of your company or genuinely believe you're under-raising? If the former, negotiate valuation up proportionally and balance your dilution expectations with their ownership needs. If the latter, listen to their thesis. Consider taking extra capital at the same dilution by increasing valuation, or create an option for an extension round in 6 months at a 20-30% step-up. Never take excess capital without a clear use case – it creates expectation for faster burn rates.
Anchor with market comparables while showing flexibility: "Based on recent Series A rounds for similar companies, we're seeing valuations in the $40-60M range. We're focused on finding the right partner who can help us scale to $100M revenue, and we're flexible on terms for the right strategic fit." This shows you've done homework while keeping negotiations open. Never throw out a number without context. Give specific examples of comparables.
Introduce timeline constraints naturally after building interest: "We're running a focused process and plan to make a decision by [date 6 weeks out], starting with first calls this week and next and moving to second and third calls with broader teams thereafter." Create urgency through business momentum: "We're launching our enterprise product in Q2 and want to have funding closed to support the go-to-market push." Avoid artificial deadlines, but communicate genuine business timing that creates natural urgency.
Build urgency through business momentum, not fundraising pressure. Share recent wins: major customer signings, key hires committed contingent on funding, or partnership opportunities with timing constraints. Let your growing metrics create FOMO – nothing creates urgency like a company growing 20% month-over-month.
Strategic investors (potential customers or partners) can provide valuable validation but can complicate future fundraising. Limit strategics to 20-30% of your round to avoid signaling issues. Negotiate restrictions on their information rights to protect competitive data. Get explicit written consent that they won't block future rounds or acquisitions, even by competitors. Price strategics at the same terms as financial investors to avoid fairness opinions and complicated cap tables.
Generally avoid investors with competitive portfolio companies.
Some exceptions: large multi-stage firms where the deal was done by a different partner, investments done many years ago out of a different fund. If unavoidable, negotiate specific protections: information rights limited to financial data, board observer versus voting rights, and explicit non-disclosure agreements. Get written confirmation they'll recuse themselves from competitive discussions. The risk isn't just information leakage but also blocked future opportunities – they may prevent their other portfolio companies from partnering with or acquiring you.
Don't immediately accept or reject – use it as market validation to refine your pitch.
If it's 20-30% below target, negotiate non-valuation terms: reduce liquidation preference, limit protective provisions, or maintain board control. Create competitive dynamics by accelerating other conversations. If you must accept lower valuation, negotiate for a smaller round to minimize dilution, with option for extension at step-up valuation based on hitting milestones.
Implement "default alive" planning when you have 6 months runway remaining. Cut non-essential expenses: reduce marketing spend, freeze non-critical hiring, renegotiate vendor contracts. Explore bridge financing from existing investors at reasonable terms. Consider revenue-based financing against predictable revenue streams. Accelerate collection of receivables and potentially offer discounts for annual prepayments. The goal is adding 3-6 months runway to close your round without distress signals.
Design your syndicate like a board of advisors with capital. Include investors with specific superpowers: one with deep industry connections, another with scaling expertise, and another with technical knowledge. Reserve 10-20% of your round for high-value angels who can make key introductions.
Successful round structuring requires balancing multiple objectives: raising sufficient capital while minimizing dilution, building a strategic investor syndicate, and maintaining control over your company's direction. The founders who excel at fundraising treat it as a core competency, not a necessary evil.
Start by understanding your specific milestone requirements and working backward to structure a round that positions you for success. Use competitive benchmarking to contextualize your ask, but don't be constrained by what others have done. The best fundraising strategies are tailored to your unique situation, team strengths, and market opportunity.
Remember that fundraising is ultimately about building relationships with partners who can help accelerate your vision. Focus on finding investors who bring more than capital – industry expertise, customer connections, and operational experience that multiply the value of their investment.
The venture ecosystem rewards founders who demonstrate sophisticated understanding of fundraising dynamics. By following this comprehensive approach, you're not just raising money – you're building a foundation for long-term success.
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