TL;DR: 2 rounds.

I don’t like to raise money.

I want to raise money once, and be done with it.

Is this smart?

Should I raise 1 or 2 rounds?

**Raise 1 round**

Where does my cash curve bottom out? Assume at -/- $1.7m. So I need to raise $1.7m.

What is my exit value? Assume $32.2m.

What internal rate of return (IRR) does a Series-Seed investor want to make on his portfolio? Assume 10.0%.

When will the Series-Seed investor sell his shares? Assume after 5 years.

A 10.0% internal rate of return on his portfolio and 5 years till exit means the Series-Seed investor has to make a 1.6x money multiple (MM) on his portfolio.

How many milestones do I have to achieve between Series Seed and exit? Assume 5 milestones.

What is the probability of success per milestone? Assume 63.1%.

Five milestones with a 63.1% probability per milestone result in a 10.0% probability of success for my startup at the time I raise a Series Seed.

A 1.6x money multiple and a 10.0% probability results in a 16.1x money multiple for my startup.

A $32.2m exit value and a 16.1x money multiple result in a $2.0m valuation.

A $1.7m investment at a $2.0m valuation means I must issue the Series-Seed investor 85.0% new shares.

**Raise 2 rounds**

I need to raise $1.7m.

How much money do I need to achieve my first milestone? Assume $200k.

And my second milestone? Assume $1.5m.

*Series A*

What internal rate of return does a Series-A investor want to make on his portfolio? Assume 10.0%.

When will the Series-A investor sell his shares? Assume after 4 years.

A 10.0% internal rate of return on his portfolio and 4 years till exit means the Series-A investor has to make a 1.5x money multiple on his portfolio.

How many milestones do I have to achieve between Series A and exit? Assume 4 milestones.

What is the probability of success per milestone? Assume 66.9%.

Four milestones with a 66.9% probability per milestone result in a 20.0% probability of success for my startup at the time I raise Series A.

A 1.5x money multiple and a 20.0% probability results in a 7.3x money multiple for my startup.

A $32.2m exit value and a 7.3x money multiple result in a $4.4m valuation.

A $1.5m investment at a $4.4m valuation means I must issue the Series-A investor 34.0% new shares.

*Series Seed*

Because I issue the Series-A investor 34.0% new shares, I must correct the Series-Seed money multiple to 16.1x / (1 – 34.0%) = 24.4x. Otherwise the Series-Seed investor will not achieve his target internal rate of return because of dilution.

A $32.2m exit value and a 24.4x money multiple result in a $1.3m valuation.

A $200k investment at a $1.3m valuation means I must issue the Series-Seed investor 15.2% new shares.

**So: 2 rounds**

If I raise $1.7m in 1 round, I end up with 15.0% of the shares. Oomph. That’s not good. Then I might just as well become an employee somewhere.

If I raise the same $1.7m investment in 2 rounds, I end up with 56.0% of the shares. That’s more like it.

**Fun fact**

Even though my Series-Seed valuation is __lower__ ($1.3m instead of $2.0m) I end up with __more__ shares. Go figure.

Thanks to Hans Westerhof and Chretien Herben.

*Joachim Blazer is author of The #1 Guide to Startup Valuation. How to value a startup in 6 easy steps. For founders and investors. For seed rounds and Series A.*