Y Combinator says “The goal should be to raise as much money as needed to get to their next “fundable” milestone, which will usually be 12 to 18 months later.”

What could these milestones be? It can be anything in terms of the development of a product (or some version), expanding the team, or acquiring a certain number of customers or share of the market. It is good to have something that is fundable and quantifiable.

For example, if you’re a SaaS startup and raising an angel round, you would want to raise enough to build the first MVP and get a few customers (the number would depend on the market). If you’re raising a seed round, then you would want to raise enough to reach $XXXk-$YMM in revenue (again numbers would vary according to the market and many other parameters).

You should also add some cushion in case things do not go as per the financial projections or the plan you had (which is usually the case). It is said that this could be at least 6 extra months of runway if possible for unexpected situations.

Also, it is important to know your monthly burn rate, that is, how much you would be spending every month on compensations, marketing, research, the other costs of development, etc. This should also incorporate your hiring plans for the next 12-18 months. The length of time would vary with business. For example, for a software company, it would take less time as compared to an aerospace company.

Alex Iskold recommends this basic formula for justifying and pitching investors with your fundraising ask: “We need to achieve milestone X. To get there, we need Y people, and we need Z capital. We believe it will take us W months to get there.”