When I talk to founders preparing to raise, especially in STEM, I’m often surprised by how little thought they’ve given to the actual size of the raise. They spend a lot of time on the pitch, or connecting with investors. But the whole point is to raise a specific sum of money. When I push them on why that much and not more or less, or what tradeoffs they considered, they often come up short.
How you address these questions could impact you for a decade or even more. Say you’re building a battery startup and need to raise a seed round. You look at current trends and decide on a $3.5 million round. It might make sense on paper, but if the actual cost to reach your Series A milestone is only $1.8 million, your “peace of mind” just cost you about 12% of your company. At a $100 million exit, that’s $12 million you just kissed goodbye to. That’s the true cost of now knowing what “enough” is.
Whatever your stage, the definition of a “reasonable”raise is shifting constantly. So are the milestones. Some investors want to see a pilot line. Others might want customer commitments. A few investors ask for even more vague things like “strong team” or “compelling market signals”. How do you make that actionable?
When you’re building a bridge in a fog to an island you can’t see yet, the usual advice about “work backwards from your next round requirements” is useless. You run the risk of unnecessary dilution (raising too much) or failed rounds (running out of runway before hitting gates that actually matter).
To protect yourself and your startup, think like a scientist to craft a high-confidence raise plan.
How to Define Your Raise Size
Your raise size is the outcome of a logical process you can defend. You need to understand the market, translate the pattern to your startup, and test your conclusion live. Here’s how.
Know Who Can Fund Your Next Round
Your first goal is to find the 20-30 firms that write checks today at your target stage for companies like yours. These are usually firms that funded companies like yours at the stage you’re targeting in the last 2-3 years.
- Go to Crunchbase and search for companies in your space, e.g. battery tech, carbon capture, synthetic biology.
- Filter for companies that raised at your target stage in the last 3 years.
- Look at who led those rounds. Start building your list.
Note: Access to these capabilities may cost you a subscription, but it might be well worth it if done right.
This approach gets you farther than just blindly copying names from investor lists. The few hours you spend building this database gives you your roadmap for both your current raise and your next one.
Know What Investors Consider Raise Ready
For each investor in your list, look at their last 10 investments at your target stage. Your goal is to get a snapshot of the key indicators that mark the startups they invested in. AI tools should make this research fast and reliable. You’re collecting data points on:
- Technical maturity: TRL level, prototype status, pilot completion. Sometimes this is stated explicitly (“We’ve completed our pilot line producing 100 units/month”). Sometimes you infer it from what they describe (“We’ve demonstrated our technology in automotive testing environments” = probably TRL 5-6).
- Customer traction: Are they talking about pilots? Design partnerships? LOIs? Actual revenue? How many customers?
- Team composition: How many people? What specific roles are mentioned? (“Our team of 8 includes…” tells you team size expectations)
- Prior capital raised: How much did they raise before this round? This tells you the typical staging pattern.
After looking at 50-100 companies (yes, you need that many to see real patterns), synthesize patterns (AI can be a big help here) such as:
- 8 out of 10 battery companies that raised Series A had completed pilot line installations producing at least 100 units/month.
- 6 out of 10 materials companies that raised seed had validated synthesis at 100g+ batch size with 3+ reproducible runs.
- 9 out of 10 carbon capture Series A companies had at least one Fortune 500 pilot customer, even if not yet generating revenue.”
You’re looking for what “good enough” actually looks like for your category at your target stage. More convergence (“7-8 companies out of 10 had X at raise”) means higher confidence. But even lower convergence, say 5-6 companies out of 10, still provides a useful signal.
If there are outliers, probe to see why. Did they have exceptional teams, or strategic investors, or were they in a hot sub-sector? Understanding the exceptions helps you understand the rules.
Pressure Test Before You Bet The Company
Now take your research into your next 5-10 investor conversations. Even with investors who are too early-stage for you right now (they write Series A checks, you’re raising Seed), ask:
“I’ve been looking at Series A companies in battery tech. Most seem to have pilot lines producing 100+ units/month and 2-3 automotive pilots. Does that match what you typically look for at Series A?”
They might be more likely to answer because you’re not asking them to fund you. You’re just pressure-testing your pattern matching against their real-world experience, while demonstrating real CEO-level thinking. What does the market tell you?
- Best case: “Yes, that’s about right. We’d also want to see a clear path to manufacturing economics, but pilot line plus customer validation is the core of it.”
- Useful correction: “Actually, we care less about unit volume and more about whether you’ve demonstrated the core performance claims in a real customer environment. 100 units/month sounds right, but it’s really about what those units prove.”
- Important addition: “All of that, plus we need to see you’ve identified your manufacturing partner and have a credible scale-up plan. That’s often what kills these companies.”
When you hear “Yes, that’s about right” from 6-7 out of 10 investors, you’ve got validated requirements.
When you hear “Actually, we care more about X than Y,” update your assumptions. Your raise is now much more sharply defined and makes you more credible in the next investor conversation.
Why Defensible Raise Logic Matters
This takes work. But you’ll get much better results for the same amount of time and energy you spend with an unfocused “spray and pray” approach. Most founders throw away real value by guessing based on what they think investors want, or what one investor told them. They don’t bring the same rigor to this exercise as they do to their product or technology. And lose potentially years or millions as a result.
When you do this step right, three things happen:
- Your current round sizing becomes defensible. When an investor asks “Why $2.1M?” you say: “Because seed investors in battery tech need to see X, Y, and Z, and here’s what it costs to demonstrate each of those.”
- Your milestone planning becomes clearer. You stop working on things that don’t move the needle for your next round. You focus ruthlessly on the 3-4 proof points that actually matter.
- Your credibility increases. When you say “I’ve looked at 60 battery seed rounds and here’s the pattern” you sound like someone who’s done their homework because you have. You’re a backable CEO.
The Question This Unlocks
The goal is to nail your raise size so you target the “just right” amount that neither dilutes you unnecessarily nor risks running short of money. The exercise you just went through helps you define what the milestones are. When you know the milestones with precision, you can break them down into actual costs that will feed into a defensible round size you can feel confident about.
Before you size your next round:
- Can you name the exact investors who could lead your next round, and explain why?
- Do you know what “good enough” looked like for the companies they funded, or are you extrapolating from advice and anecdotes?
- What assumptions have you made about readiness, and which of these have you actually validated with investors?
Most founders never answer these questions explicitly. Be one of the few who do. The payoff might be far bigger than you ever imagined.
