Couldn’t agree more with what Nivi of Venture Hacks said in his Quora post on the subject:
Raise less if you want to keep your valuation down and keep the option open for an early exit where everyone (investors, employees and founders) makes money.
Raise more if you’re here for the long term and you want to protect your company from poor funding environments or hiccups in your growth. Just try to maintain control, monitor your liquidation preference, and monitor your dilution. Also understand that, if your valuation is high in this round, you will have to make a lot of progress for the next round to be an up round.
In summary, raise too little money and you may go out of business when you run into trouble. Raise too much money and you may make less dough when you exit. Take your pick: disaster vs. dilution.
In either case, try to act like you don’t have a lot of money. The conventional wisdom is that when you have a lot of money, it’s hard not to slow down because you start spending it (which takes time in and of itself) and you start thinking that you have a lot of time left before you die, so what’s the hurry?
(emphasis mine in the last paragraph)
Deciding how much money to try and raise is one of the most critical decisions a start-up entrepreneur faces. All to often the focus is too much on price/dilution and not enough on the reality of cash burn and runway.
As an add-on to Nivi’s consise, yet profound, analysis - every incremental hour/day/month spent thinking about how much to raise or how to structure a venture round is an hour/day/month that could be spent growing the business and moving towards generating revenue and cash which will make the business truly valuable. The goal of a start-up is not to raise a venture round - it’s to create long term shareholder value. The best way to do this is to generate revenue and sustainable cash flows. From there, eventual investment dollars, and exit possibilities, will soon follow.