Raise for Lift
When founders prepare to raise, one of the first questions we get asked is how much they should aim for. The answer we hear most often is to multiply monthly burn by a target number of months. I think the better answer starts with lift. Raise enough to reach the next milestone that meaningfully improves your fundraising position.
Lift is the point where you prove the thing investors are most worried about. Before lift, the company competes for investors; after lift, investors compete for the company.
I first heard this from Keith Rabois, and I've found the framing holds for most early stage companies, and for growth companies raising before profit.
Runway or lift?
Runway is the time a company can operate before cash runs out at its current burn. It measures time. It says nothing about progress.
Each round buys the time and resources to retire one key risk. A key risk is a question that, answered badly, stops the company being valuable. Will customers pay? Can the product be built? Can growth be bought efficiently? Lift is the proof point that retires the biggest of those risks.
Retiring that risk is what earns the step up in valuation at the next round.
Fund the runway, raise on lift
My starting point is to fund 18 to 24 months of runway. Size it on the expected path to lift, then let lift set the timing of the next raise.
The runway pays for rebuilding momentum after this raise, the path to lift, the next raise, and a margin of safety so you don’t need to raise from weakness.
The raise-by line is the last point you can start a process and still close with the margin of safety in the bank. Work it out as runway, less the time to raise, less the months you hold as a margin of safety.
The strongest companies might reach lift and raise again within six months. Growing revenue reduces burn, which stretches the runway and moves the raise-by line later. Delays move lift later, which eats into the time before the line.
Runway tells you how long you have. Lift tells you what the time is for.
Further reading
Lessons from Five Companies (Part II) by Keith Rabois and David Weiden