How much should Startups Raise in each Round?

Kartikeyan Khator
5 days ago
3 min read

Updated: 4 days ago

One of the biggest mistakes founders make is telling investors,

“We’re raising because our competitors are raising.”

Fundraising should always be rooted in the actual needs of the business. You raise what your own business model demands. But this does not mean that founders should raise all at once. Fund requirement should be broken down in phases, where each round is aligned with the next set of tangible milestones.

For example, if you plan to build a SaaS platform that will solve a 100 problems, requiring $10M in total, try breaking it down into phases – build a prototype that addresses the most crucial problems, raise $0.5M to test the market and achieve POC, raise $4M to hire, build features to solve more problems, improve interface, market the product and gain traction, and so on. This way you can show objective targets from each fundraise which once achieved will justify the next, often bigger, round. And you also get to conserve your shareholding. Now, before you say that raising meagre amounts will not get you too far, know that startups like Mamaearth, Atomberg and Sugar raised only $100K to $200K in their maiden round, and now you know where they are.

The next natural question would be that since each business has its own nuances and each founder can have their own unique plans of building their business, so does this mean that founders can approach investors with any wild number or should it follow what the investor ecosystem is accustomed to seeing?

If your venture is a case of disruptive innovation, it can demand more than the industry median, because your promise is unique and investors do not have any alternative. But if your venture is a case of sustaining innovation, then it should ideally target round sizes that follow the industry medians, because investors have enough alternative ventures to invest in to have the same potential outcome from their investment so they would prefer to go with the one that requires the least investment.

To summarize, founders can follow this simple 3-point rule:

Project fund requirement based on your business nuances and clear objectives, and not simply on FOMO
Don’t raise all at once. Aim for a runway of 24-30 months – better valuation, better value for money
If you’re sustaining innovation, don’t go way off from the industry averages, as it could signal unrealistic scaling plans

The Benchmarks

We looked into all the fundraises by Indian startups between mid 2022 to mid 2025 to set benchmarks for planning your round size. Interestingly, you can combine these findings with the median gap between each round discussed in our article - When should Startups start Planning to Raise Funds?, which can be interpreted as your targeted cash runway for each round, to breakdown your entire cash requirement into multiple rounds.

Source: 1 - Startup Indian analysis

After reading through all of this, you must be wondering, how do people like Deepinder Goyal and Bhavish Aggarwal raise as much as $50M for their new ventures then? The straight answer to that is: Human Capital trumps all logic. So, if you think your Human Capital is strong, sky is the limit.

Sectoral Benchmarks

We talked about the broader ecosystems’ benchmark numbers before this. While those numbers hold true for most of the sectors, there are some of them where the numbers differ due to their intrinsic nature (only exceptions discussed):

Fintech: Being an evergreen sector in India, raised a median seed round of $960K and Series A round of $5M.
Advanced hardware and tech startups: In Series B round, deep-tech hardware ventures raised a median of $14.7M, which significantly differs from the overall median of $9M.
Consumer goods and D2C startups: Raised median pre-seed round size of $970K and Seed round of $400K, each over $100K lower than the overall median.
Consumer services: Raised a median seed round of $700K and Series B round of $9.6M.

Startup Indian can support founders and ventures in the following ways:

Fundraise Preparation - Pitch Deck, Financial Model, When-How Much-Whom to Raise From, Deal Documentation and more. Know more here.
Business Valuation - Adopt multiple methods attuned to startup stage, to negotiate better with investors. Know more here.
Fundraising (as Investment Bankers) - Leverage our network to reach out to investors, lead conversations on your behalf, deal negotiation and closure. Know more here.
Shared CFO - Finance function handholding, top notch governance, internal controls, ongoing financial planning and more. Know more here.

This article featured in our Founder's Playbook which answers questions around startup fundraising - when, how much, at what price, and more. You can access the Playbook here.