1. Idea & Validation (0–3 months)
  • Define problem, target customer, value proposition (Lean Canvas).
  • Customer discovery: 20–50 interviews, validate pain and willingness to pay.
  • Build low-fidelity prototypes or landing page + smoke tests (Adwords, email signups).
  • Metrics to hit before next step: consistent positive signal (click-throughs, paid pilots, LOIs).
  1. Pre-Seed / Friends & Family / Bootstrapping (3–9 months)
  • Build MVP (usable product) and initial traction (early users, retention, revenue or letters of intent).
  • Form founding team, incorporate, IP and equity splits, basic legal.
  • Raise pre-seed (~$50k–$500k) to extend runway 6–12 months if needed.
  • Milestones: working MVP, first paying customers or clear pilots, unit economics start to appear.
  1. Seed Round (6–18 months after start)
  • Goal: scale product, hire core team (engineer, growth/BD), prove repeatable acquisition.
  • Raise seed (~$500k–$3M) from angels/seed funds.
  • Deliverables for investors: CAC, LTV (or strong usage growth), churn, roadmap, defensibility.
  • Milestones: scalable acquisition channel, >K users or meaningful revenue ($50k–$250k ARR typical benchmarks vary by sector).
  1. Series A (12–36 months)
  • Goal: product-market fit → scale growth and revenue, establish unit economics.
  • Raise Series A ($3M–$15M+) for hiring, go-to-market, ops.
  • Expectations: clear metric growth (monthly revenue growth, conversion funnels), repeatable sales process, retention cohorts.
  • Milestones: ARR targets (often $1M+ ARR for many SaaS startups; consumer/marketplace differs), predictable growth and margins.
  1. Series B / Growth Rounds (24–60 months)
  • Goal: expand market share, geography, product lines; optimize operations.
  • Raise Series B/C ($10M–$100M+).
  • Focus metrics: revenue scale ($10M+ ARR common), unit economics, customer diversification, strong leadership team.
  • Milestones: profitability pathway or dominant market position.
  1. Later-Stage / Pre-IPO or Acquisition (4–8+ years)
  • Goal: prepare for exit: IPO or acquisition.
  • Raise growth equity if needed, finalize governance, compliance, financial controls.
  • Milestones: sustained revenue growth, margins, audited financials, enterprise processes.

Cross-cutting actions (always)

  • Fundraising prep: pitch deck, financial model, cap table, data room.
  • Legal/finance: incorporation, contracts, payroll, taxes, option pool.
  • Metrics & KPIs: choose metrics that match your model (ARR, MRR, CAC, LTV, churn, burn rate, runway).
  • Networking: warm intros to investors, advisors, strategic partners.
  • Fundraising cadence: start raising 4–6 months before runway ends; aim for multiple leads and term sheet comparisons.
  • Governance: set board, investor communication cadence, clear use of funds.

Common timelines and amounts vary widely by industry and region. For specifics tailored to your sector (SaaS, marketplace, biotech, hardware), provide the industry and current stage and I’ll give a customized milestone checklist and target metrics.

Sources: Steve Blank & Bob Dorf, The Startup Owner’s Manual; Reid Hoffman & Chris Yeh, Blitzscaling; common VC guidance (a16z, Sequoia playbooks).

Explanation: Raising a pre-seed round in the $50k–$500k range is appropriate when the next objective is to convert early validation into repeatable traction. That amount typically buys 6–12 months of runway—enough time to build a working MVP, close initial paying customers or pilots, and begin to demonstrate unit economics. These milestones reduce technical and market risk enough to justify seeking a larger seed round.

Why this amount and timeframe:

  • Scope matches goals: $50k–$500k funds development of core product features, basic infrastructure, small sales/marketing experiments, and possibly one or two pilot deployments without over-diluting equity.
  • 6–12 months is the shortest realistic window to iterate on product-market fit based on early customer feedback and to convert pilots into paying accounts.
  • Hitting the milestones listed (working MVP, first paying customers or clear pilots, early unit economics) materially increases your valuation leverage for the next seed round and convinces investors you’ve moved from idea/tech risk toward commercial viability.

Key investor expectations at pre-seed:

  • Demonstrable execution (MVP live and used)
  • Evidence of demand (paid customers or committed pilots)
  • Early economics that show revenue per customer > marginal cost or a credible path to it

References:

  • Paul Graham, “Startup Funding: The Different Stages” (essays on funding stages and objectives)
  • Steve Blank, The Four Steps to the Epiphany (customer development and pilots)

Idea & Validation (0–3 months)

  • Typical equity given up: 0%–5%
  • Explanation: Founders usually keep nearly all equity. If any shares are granted, they’re to early co‑founders, advisors, or via small friends & family SAFE convertible notes with minimal dilution. Use of SAFE or convertible notes defers valuation decisions.

Pre-Seed / Friends & Family / Bootstrapping (3–9 months)

  • Typical equity given up: 5%–15%
  • Explanation: Early checks from friends/family, angel investors, or pre‑seed funds buy a meaningful but small stake. Convertible instruments (SAFEs/convertibles) are common; when priced, dilution typically falls in this range. Also set aside an option pool (5%–15%) that effectively dilutes founders.

Seed Round (6–18 months)

  • Typical equity given up: 10%–25%
  • Explanation: Seed rounds price the company and bring institutional angels/seed funds. Investors expect a significant minority stake for the capital and support. Founders’ combined ownership often falls substantially after this round and after creating a larger option pool (often 10%–20% pre‑ or post‑money).

Series A (12–36 months)

  • Typical equity given up: 15%–30%
  • Explanation: Series A investors take a sizable block to fund scaling. Cumulative dilution by A often leaves founders with <50% combined (depends on prior rounds). Option pools are frequently refreshed, adding further dilution.

Series B / Growth Rounds (24–60 months)

  • Typical equity given up: 10%–25% per round
  • Explanation: Later rounds continue to dilute existing holders as larger sums are raised. By Series B/C, institutional investors expect significant ownership; founders’ stake can fall to low double‑digits unless they secured large earlier shares or avoided heavy dilution.

Later-Stage / Pre‑IPO or Acquisition (4–8+ years)

  • Typical equity given up: variable (often smaller % per round)
  • Explanation: Late rounds may dilute further but often at higher valuations, so percentage given up can be smaller relative to dollars raised. Founders typically retain single‑digit to low‑teens percentages at IPO/acquisition, though exceptions exist.

Notes & Practical Tips

  • Cumulative dilution depends on number of rounds, deal structures (equity vs SAFEs vs convertible notes), option pool sizing and whether pools are created pre‑ or post‑money.
  • Founders should model cap table scenarios for each raise and negotiate option pool treatment and liquidation preferences.
  • Benchmarks vary by region and sector; e.g., deep‑tech or biotech startups often take larger rounds earlier, potentially increasing dilution.

Sources: Sequoia and a16z fundraising guides; Steve Blank & Bob Dorf, The Startup Owner’s Manual; common VC term‑sheet practices.

A family SAFE (Simple Agreement for Future Equity) is a fast, low-cost way to accept pre-seed capital from friends and family while avoiding complex valuation negotiations. It defers equity pricing until a later priced round, reducing legal friction and preserving runway quickly.

Key reasons to select a family SAFE convertible:

  • Speed and simplicity: one-page template, minimal legal fees, quick to execute so funds arrive promptly to extend runway.
  • Low transaction costs: cheaper than a priced round or convertible note (no interest, no maturity date), which is important for small checks typical from friends & family.
  • Founder-friendly: delays valuation until professional investors set price, avoiding early over- or under-valuation and excessive dilution.
  • Flexibility: can include basic terms (cap, discount) or keep it uncapped for very small, informal checks; convertible nature aligns investor upside with later rounds.
  • Clear alignment: signals to professional investors that the round was bridge-style rather than a formal priced financing.

Risks and mitigations:

  • Future dilution surprises: use simple, transparent cap/discount terms and explain mechanics to family investors.
  • Unsophisticated investors: provide plain-language disclosure and consider offering a short investor briefing or recommending they consult counsel.
  • Cap table complexity later: track SAFEs carefully in your cap table and model scenarios for seed pricing.

Bottom line: For raising ~$50k–$500k from non-professional acquaintances to buy 6–12 months of runway, a family SAFE convertible balances speed, cost-effectiveness, and founder-friendly economics—making it a sensible pre-seed choice when paired with clear communication and basic legal review.

References: Y Combinator SAFE template; Paul Graham and common VC practice on early-stage instruments.

Typical equity given up: 5%–15%

Explanation: At this stage founders trade a small but meaningful stake to secure the cash needed to build an MVP, prove early traction, and extend runway. Funding often comes via friends & family, angel investors, or pre‑seed funds using SAFEs or convertible notes; when those convert to a priced round the dilution typically lands in the 5%–15% band. Founders should also create an employee option pool (commonly 5%–15%), which increases effective founder dilution once allocated. Using convertible instruments defers valuation negotiations, smoothing early fundraising while preserving negotiating leverage for the seed round.

(For comparison: 0%–5% scenarios occur when founders bootstrap entirely or only grant tiny stakes to advisors/very small early checks; those are exceptions rather than the norm.)

Short explanation: Convertible instruments (SAFEs, convertible notes) postpone fixing a valuation until a later priced round. That lets founders raise small, fast checks to build traction without locking in a low valuation that would cause unnecessary dilution now. Investors accept deferred pricing because they take upside via conversion at a discount or cap. Deferring valuation smooths early fundraising by simplifying terms, speeding legal processes, and preserving founders’ negotiating leverage for the seed round—when stronger metrics produce a better price and more favorable economics for the company.

Notes:

  • Common convertible features: discount, valuation cap, and sometimes interest (notes), which align investor upside while keeping initial paperwork minimal.
  • Watch out for multiple caps/discounts piling up and for how the option pool is treated at conversion—model cap‑table scenarios before issuing.

References: Y Combinator SAFE docs; common VC playbooks (Sequoia, a16z) on seed financing.

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