StructuringFundraising Strategy
How Much Should You Raise? The Complete Guide to Startup Fundraising in 2025
Learn how to calculate your raise amount, choose between SAFEs and priced rounds, and navigate term sheets strategically.
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Discover the strategic approach to valuation that balances optimal funding with founder equity retention.
Mark Bugas
Your startup's valuation should be anchored in three key factors: comparable deals from similar companies that recently raised (found through Crunchbase, PitchBook, or Flowlie), current market dilution norms (typically 15-20% for seed/Series A), and the amount of capital you need to reach your next major traction milestone. Start by modeling backwards from the next round's revenue target. For example, if you're raising a Seed, identify the Series A target (now $3M-$5M ARR for SaaS), determine how much runway you need to get there, then benchmark against recent deals in your vertical to set a valuation that balances founder ownership with investor expectations.
The formula is simpler than most founders think: if you're raising $2M and targeting 15% dilution, your post-money valuation should be approximately $13.3M. However, this number only works if it aligns with what similar companies are raising at and positions you for a healthy step-up (typically 2-3x) at your next round.
Why This Matters Now: The valuation landscape has fundamentally shifted since 2022. What worked during the venture boom—aggressive valuations based on potential rather than traction—has led to down rounds for nearly half of the unicorns that managed to raise again. Meanwhile, Series A bars have doubled from $1M to $3-5M ARR for SaaS companies, meaning your seed valuation must account for this longer, more capital-intensive path to your next round.
Here's what you need to know about setting a valuation that protects your ownership, attracts investors, and sets you up for long-term success:
Your valuation impacts:
Equity & dilution
How much ownership the founders & team retain. You can use our Dilution Calculator to visualize how different valuation scenarios will affect ownership percentages across multiple funding rounds.
Future fundraising rounds
Sets expectations for Series A & beyond with little room for error. Raise at too high a valuation, and you risk being over-valued compared to your traction ahead of the next round, raise at too low of one and you risk overdiluting and reducing optionality.
Team incentives
Impacts hiring & retention. It becomes very hard in later stages to attract & retain employees if the employee stock option pool runs out and there’s no ability to refresh it.
Post-seed, the median founding team owns 56% equity. After Series A, that drops to 36% (Carta Founder Ownership Report 2025).
Your biggest levers are valuation & round size. Small tweaks can preserve long-term ownership across rounds.
Plan for future fundraising
Even if you’re aiming for profitability and this being the last round, assume you'll need to raise again. Flexibility = leverage.
The increasing popularity of bootstrapping
More founders are avoiding the venture route since the recent tech bubble popped to maximize ownership and control – especially since smaller exits can yield bigger payouts.
B-school teaches the VC Method & frameworks like Berkus. Reality? Early-stage valuations are driven by:
Market demand
What investors are willing to pay for ownership in your startup. Generally speaking, the more competitive the round, the more investors are willing to be flexible on valuation (i.e. higher demand = higher valuation).
Founder dilution norms
Typically 15% - 20% for Seeds and Series A’s (though ideally less), and 10% - 12% per round from thereon out (2024 Carta report here). Investors are aware of what is “acceptable” dilution, and should be incentivized not to overdilute the founding team because they know overdilution can be an impediment to attracting future investors.
Comparable deals
What other, similar startups recently raised at. This is where VCs have the edge, as they’re always in-market, whereas founders may be in-market once every few years. As a result, they have a “finger on the pulse” and can generally tell you what certain types of deals are “going for”.
There’s no perfect formula - we suggest using multiple data points to come from a position of strength. Investors appreciate a well researched “ask”:
Direct comps
Valuations of similar startups (same stage, geo, vertical, etc.) that recently raised. The easiest way to get this information is by working with a venture data provider such as Crunchbase, Pitchbook, or Flowlie.
Market norms
Carta and Pitchbook in particular have fantastic quarterly reports showing valuation trends by stage and deal size.
Round size & Dilution
These are the levers that impact valuation. Generally speaking, the larger the round, the higher the valuation tends to be to counteract dilution. Founders should consider the tradeoffs between the amount of cash raised, how much dilution they will incur, and how the valuation that is set impacts their future prospects (for example, will they be over-valued compared to their traction when going out for the next round of funding).
Over Simplified Example: If I raise $2M on a $20M post-$ valuation (that is, the valuation including the cash raised), all existing equity holders will be diluted by 10%. If I raise $4M without changing the valuation, dilution jumps to 20%.
Pro tip: Valuation isn’t just about traction or growth rate. Investors factor in market conditions, competition, and team strength, among a myriad of other qualitative and quantitative factors.
Step-ups
The ratio of this round’s valuation to the last. Consistent, healthy step-ups = investor confidence. Carta has great information here as well (latest report).
When do revenue multiples start to matter?
The ratio of valuation to revenue run rate. These start coming into play from the Seed stage on. Take a look at multiple reports like DealRoom’s to get an understanding of market averages and model out how much cash is needed to get you to a traction milestone that will appeal to investors in the next round.
Traction expectations are rising
What’s “fundable” at Series A is a moving target. Recently, the revenue bar has climbed from $1M ARR to $3M-$5M ARR for many SaaS startups. (Source: Mosaic Series A Report).
Warning: Over-inflated valuations in 2022 led to brutal down rounds. Higher isn’t always better. <30% of the unicorns from 2021 have raised financing in the past three years, according to Carta. Of those, almost half have done down rounds.
The Key: Model out how much cash you need to get to a traction milestone that will excite investors at the next round. Our Runway & Funding Calculator helps founders determine exactly how much capital they need and how long it will last. Think of this as future proofing your business.
Do your homework. Be prepared to:
📌 Reference comps → Show similar deals & valuations.
📌 Benchmark against reports → Market data = credibility.
📌 Justify premium → If your growth rate, team, or traction is exceptional, make the case for a higher valuation.
Example: If your growth rate outpaces comps, argue for a higher multiple. If not, align with market medians.
Your valuation isn’t just a number – it’s a strategic lever that impacts ownership, funding, and long-term success.
Be data-driven → Use comps, reports & factor in investor expectations.
Think long-term → A realistic valuation can set you up for success with future rounds.
Control dilution → Small tweaks now = big impact later.
P.S. Looking for a ready-to-use list? Check out our curated Seed lead investors list.
Startup valuation is the estimated worth of your company at a specific point in time, typically determined during a fundraising round. It matters because it directly affects how much equity you give up to investors, sets expectations for future funding rounds, and impacts your ability to attract and retain talent through stock options. A well-calibrated valuation preserves founder ownership while providing the capital needed to reach key milestones.
Founders typically dilute 15% to 20% in seed and Series A rounds, though less is ideal. After the seed stage, median founding teams retain about 56% equity, which drops to 36% after Series A according to Carta's 2025 report. From Series B onwards, dilution typically ranges from 10% to 12% per round. The key is balancing the capital you need with preserving enough ownership to stay motivated and attract future investors.
Early-stage valuations are primarily driven by three factors: market demand (how competitive your fundraising round is), founder dilution norms (what's considered acceptable ownership given up), and comparable deals (what similar startups recently raised at). Additional factors include your growth rate, team strength, market conditions, traction milestones, and the competitive landscape. Contrary to business school frameworks, real-world valuations are more about market dynamics than formulas.
Start by identifying similar startups in your stage, geography, and vertical that recently raised funding. Use venture data providers like Crunchbase, Pitchbase, or Flowlie to access deal information. Review quarterly reports from Carta and Pitchbook that show valuation trends by stage and deal size. Your investors likely have better market intelligence since they're always active in the market, so asking them about current deal trends can also provide valuable insights.
A valuation step-up is the ratio of your current round's valuation to your previous round's valuation. Consistent, healthy step-ups demonstrate investor confidence and business progress. They're important because investors in later rounds want to see momentum and growth justifying higher valuations. Conversely, down rounds (when valuation decreases) can signal trouble and make future fundraising more difficult. Carta provides detailed reports on typical step-up ratios across different stages.
Setting valuation too high risks a down round if you can't meet inflated expectations by your next fundraise. Setting it too low means unnecessary dilution and lost equity. To find the right balance, model how much capital you need to reach your next major traction milestone, research comparable deals and market norms, consider realistic dilution percentages, and think through the step-up you'll need for your next round. Use multiple data points rather than relying on a single method.
Revenue multiples are the ratio of your company's valuation to its revenue run rate. They become relevant starting at the seed stage and increasingly important in later rounds. Different industries have different typical multiples, so reviewing reports like DealRoom's helps you understand market averages for your sector. These multiples help you model how much revenue you'll need to achieve a certain valuation at your next fundraising milestone.
Seedstrapping refers to raising one or two funding rounds to reach profitability and escape velocity, after which additional fundraising becomes unnecessary. This strategy has grown in popularity in 2024 and 2025 as more founders seek to maximize ownership and control, especially since smaller exits can yield bigger founder payouts. It's worth considering if you can reach sustainable profitability with limited capital and prefer to avoid the venture treadmill.
Traction expectations for Series A have risen significantly. For SaaS startups, the revenue bar has climbed from $1 million ARR to $3 million to $5 million ARR in recent years. This means seed-stage companies need to plan for raising more capital or operating longer runways to hit these higher benchmarks. Understanding these shifting goalposts is crucial when setting your valuation and determining how much to raise.
The venture boom of 2021-2022 led to inflated valuations that resulted in brutal down rounds when market conditions normalized. According to Carta, fewer than 30% of unicorns created in 2021 have raised financing in the past three years, and of those that did, almost half experienced down rounds. This serves as a cautionary tale that higher valuations aren't always better—sustainable, data-driven valuations lead to healthier long-term outcomes.
Come prepared with research and data. Reference comparable deals and valuations from similar startups, benchmark against market reports from sources like Carta and Pitchbook, and if you're asking for a premium valuation, clearly justify it with exceptional growth rates, team strength, or traction. Investors appreciate founders who've done their homework and can articulate a well-reasoned valuation based on market realities rather than arbitrary numbers.
Several tools can help you think through valuation strategically. Dilution calculators help visualize how different valuation scenarios affect ownership percentages across multiple funding rounds. Runway and funding calculators help determine how much capital you need and how long it will last. These modeling exercises help you work backwards from your next traction milestone to determine the right amount to raise and at what valuation.
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