Q1. How long should our seed funding last before our next funding?
Usually 24-30 months. Given current macroeconomic conditions, you should aim for a longer runway (i.e. minimum of 30 months)
Q2. When should I start working on my next round?
8-12 months before the end of your runway
Q3. What should my monthly gross burn rate be (for seed companies)?
Start as low as $100k and then gradually increase. The first-year average is between $200K and $300K
Q4. Which is better: office rent or shared workspace?
It is highly popular for the first 6 months and up to a year to choose a shared space option (WeWork and the like) since it is flexible, provides full facilities and can be cheaper.
Q5. Do I need to show revenues in the Seed budget, and what should the annualized recurring revenue (ARR) be?
It is preferable to show approximately $500K-$1M ARR in a seed budget. It could be in the last couple of quarters before the end of the runway.
Q6. What should the ARR be for an A round?
If our end-of-period (EOP) ARR for a seed stage company is $0.5M-$1M, then at the A round stage, ARR should be approximately $3M-$4M. We strive to triple the first-year ARR and double or triple it in the next few years.
Q7. Where should my sales and marketing teams be located?
As close as possible to the market you are targeting. For B2B companies seeking US-based customers, those teams should be located in the US.
Q8. What professional services do I need to consider when starting a company?
Ongoing services will include legal, audit, financial services (Nextage), insurance, options trustees, and compliance. Some companies also choose to use Operations/Admin/HR as a Service.
And lastly… my favorite question:
Q9. Why do I need to build and maintain such a robust budget?
a. It is a necessary part of the fundraising process – particularly, to understand how much funding is required, what it’ll be spent on, and what the runway will be.
b. It is an operational necessity to ensure the company operates within its planned limits and remains focused on the targets set for the year.
c. It allows us always to be prepared for additional investments, exits, etc., and to adjust for macroeconomic changes and other business challenges that may arise along the way (e.g. scenario planning, pivots, etc.).