How Much Should a Startup Raise? The Seed Round Sizing Formula in Excel

Most founders size a round one of two ways. They pick a number that sounds normal for their stage, or they take today's burn and multiply it by 18 or 24. Both methods skip the thing that actually decides the answer. That is the shape of your spending and revenue between now and the next round.

This guide builds the raise number from a monthly cash plan. It uses one sample company all the way through so you can check every figure.

The formula

The amount to raise is the cash you will burn before the next round closes, minus the cash you already have, plus a cushion.

Raise = Cumulative net burn to the next round − Cash on hand + Contingency

Each part needs a definition.

Cumulative net burn is the sum of monthly net burn across the whole period. Net burn is gross spend minus cash revenue in that month. You add up the months because burn changes as you hire and as revenue grows. If the plan turns cash-flow positive before the period ends, use the highest point the running total reaches, not the last month. That peak is the deepest the bank account ever goes.

The period is the months to your next milestone plus the months a raise takes. If you need 18 months to reach Series A metrics and a raise takes 6 months, plan for 24.

Contingency covers the things that go wrong. A common choice is 10% of the gap.

The sample company

A seed-stage B2B software company has these numbers.

The shortcut and why it fails

The shortcut takes today's net burn and multiplies it by the period.

Net burn today is 90,000 minus 10,000, which is 80,000. Over 24 months that is 1,920,000. Subtract the 300,000 in the bank and the shortcut says raise 1,620,000.

The shortcut misses the hiring plan. Burn in month 1 is the lowest it will be for the next year. Once the month 4 hires start, net burn jumps to about 116,700. The shortcut never sees that jump.

The month-by-month build

Set up one row per month with five columns: gross burn, revenue, net burn, cumulative net burn and cash left.

In Excel, with month numbers in column A starting in A2:

Fill down to row 25. The gap before contingency is then =MAX(E2:E25)-300000. MAX picks the peak of the running total, which is the same as the last row whenever net burn stays positive. Here are selected months.

| Month | Gross burn | Revenue | Net burn | Cumulative net burn | |---|---|---|---|---| | 1 | 90,000 | 10,000 | 80,000 | 80,000 | | 3 | 90,000 | 12,100 | 77,900 | 236,900 | | 4 | 130,000 | 13,310 | 116,690 | 353,590 | | 12 | 130,000 | 28,531 | 101,469 | 1,226,157 | | 13 | 160,000 | 31,384 | 128,616 | 1,354,773 | | 18 | 160,000 | 50,545 | 109,455 | 1,944,008 | | 24 | 160,000 | 89,543 | 70,457 | 2,475,027 |

Cash runs out early. Cumulative burn passes 300,000 in month 4, which is why this company is raising now.

Reading the answer

Cumulative net burn over 24 months is 2,475,027. Subtract the 300,000 on hand and the gap is 2,175,027.

Add 10% contingency and the number is 2,392,530. Round it to a raise of 2.4 million.

Compare that to the shortcut. The shortcut said 1,620,000. The real gap is 2,175,027 before any cushion. The shortcut is short by 555,027, which is more than four months of burn at the month 13 level. A founder who raised the shortcut number would hit zero around month 18. That is the month the Series A pitch was supposed to start.

Now look at the 18-month line. Cumulative burn at month 18 is 1,944,008, so a raise sized only to the milestone would be 1,644,008. That covers the work but not the fundraise that follows it. The 6 months of fundraising cost 531,019 on their own in this plan. They need to be in the number.

Growth is the biggest lever

Revenue growth changes the answer more than anything else in the plan. Here is the same company at three monthly growth rates, with hiring unchanged.

| Monthly growth | Revenue in month 24 | Peak cumulative burn | Gap after cash | Raise with 10% | |---|---|---|---|---| | 5% | 30,715 | 2,914,980 (month 24) | 2,614,980 | 2,876,478 | | 10% | 89,543 | 2,475,027 (month 24) | 2,175,027 | 2,392,530 | | 15% | 248,915 | 1,695,564 (month 20) | 1,395,564 | 1,535,121 |

Going from 10% to 5% growth adds almost half a million to the raise. Going from 10% to 15% cuts it by about 860,000.

The 15% row is where the peak matters. Revenue passes 160,000 in month 21, so net burn turns negative and the running total starts to fall. By month 24 it is back down to 1,518,322. A raise sized on that last row would be 1,340,154, which is 194,967 short. Even counting the 10% cushion, the company would run out of cash in month 18, three months before it turns cash-flow positive.

So which growth rate should you plan on? Plan on the rate you have actually seen for the last three to six months, not the rate in your pitch deck. If the 10% plan works but the 5% plan needs a raise you cannot get, you have learned something important. You may need to slow the hiring plan, or set a hiring trigger tied to revenue instead of a calendar month.

Checking the dilution

The raise has to make sense against the price. Seed rounds often sell somewhere around 15% to 25% of the company. The math is simple.

Dilution = Raise ÷ Post-money valuation

At a 2.4 million raise, here is what each post-money means.

If the market will only pay 8 million post-money, a 2.4 million raise is 30% of the company. At that point you have three choices. You can raise less and reach a smaller milestone. You can cut the burn plan. Or you can accept the dilution. The model lets you test each one in a few minutes.

Do not forget the option pool. If investors ask for a 10% pool created before the round, founders absorb that dilution too. The raise itself does not change, but your ownership after the round drops.

Common mistakes

Using booked revenue. Runway is about cash. An annual contract billed upfront is cash today. A customer on 45-day terms pays a month and a half late. Use the month the money arrives.

Leaving out one-time costs. Legal fees for the round, a yearly insurance bill, a conference, a laptop for each new hire. They do not show up in a normal month but they do show up in the bank.

Forgetting the minimum cash floor. Few companies can run to exactly zero. Payroll has to clear and vendors want to be paid. Many founders treat two months of burn as the true zero. In this example two months of gross spend at the month 24 level is 320,000.

Planning a single scenario. Build the base case, then a slow case at half the growth rate. Raise for something between them. The table above shows how wide the range can be.

A checklist before you send the number to investors

For a monthly plan you do not have to build yourself, see the Numbersmith startup financial model. Its Runway and Raise tab sizes the round from a 36-month hiring and revenue plan that ties to all three statements. We have not yet confirmed that its raise figure uses the lowest cash month, so if your plan turns cash-flow positive inside the 36 months, compare it with the peak rule in this guide.

This guide was written with AI assistance. Every figure was re-checked month by month.

For education and planning only, not financial advice.