This is referred to as the Monetary Enigma. You want the appropriate quantity of money at each stage of your business.

Too little money

The worst moment to raise money is when you need it, and the market is unwilling to provide it. When markets fall, so does venture capital. We were in the midst of the longest bull market in history only eight months ago. Many entrepreneurs were too young to recall the Great Recession, and even fewer survived the 2001 dot-com disaster.

Founders are concerned about dilution. You'll be diluted for the rest of your life, so get over it. You should ask yourself if an investment will boost the price of your stock more than it will dilute it. For example, if an investment cuts you by 20%, do you believe you can invest that money to enhance your share price by 20% or more? If the response is affirmative, proceed with the investment. If the answer is no, you don't have a business and should probably take the money because your stock isn't worth as much as you believe.

Remember:

Pigs are butchered while bears and bulls gain money.

Downturns are unavoidable.

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Too Much Cash

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A startup is more than a hypothesis on how you intend to solve a perceived need. You have a lot of difficulties to iron out before you can scale—product, market fit, go-to-market strategy, key individuals, and so on. On the other hand, those hot businesses raise a large sum of money far too early. You don't want to rapidly grow before you've addressed fundamental challenges and identified a Scalable Opportunity. When you raise large sums of money, you grow too quickly, causing your blunders to be replicated worldwide.

Furthermore, some conflate raising large sums of money at exorbitant values with "success." They believe they have "arrived." People get foolish and relocate to pricey offices. They travel first class. They provide benefits similar to Google and Facebook. They prioritize spending on non-essentials for long-term company success.

You've built much-preferred equity ahead of your ordinary stock. Then come to the down rounds, which sap your and your team's enthusiasm.

Just Enough Cash

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Startups often go through several phases, and you want to raise enough money to advance to the next one. To be clear, most businesses fail because they do not have a decent product, which is not a financial issue. It would help if you tried to spend as little money as possible finding that one out.

Product Creation

You have a concept and need to create an MVP so that people may buy it. This step usually does not cost as much as people assume. No, it's usually your free work and money from family/friends. Unless you're a seasoned entrepreneur, you're unlikely to attract venture capital to support this stage.

Validation of the Market

Market validation demonstrates that buyers require your product and are willing to pay for it (proof that you are creating value). The first ten clients are challenging to acquire, but the following 100 are unavoidable once you do. This step usually takes between $500k and 1mm. If you're a SaaS startup, your goal is to reach $500k-1mm in ARR.

Pre-Growth

You have a product that people desire, but you haven't addressed all of the significant issues. Perhaps your product fits a fundamental client demand but has room for improvement. You still lack critical executive positions. You're still experimenting with strategies to scale client acquisition. This stage typically requires between $1 and $5 million and is completed by an early-stage venture capitalist. If you're a SaaS startup, you should have $500k-1mm in ARR and aim to increase this 10x over the following 2-3 years to $5mm-10mm in ARR.

Growth

At this point, you should have an executive team capable of scaling 10x. All procedures for scaling services like sales, customer support, product management, and engineering should be in place. You should have a financial staff that can anticipate revenue and costs correctly.

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