Raising capital isn’t just about having a great idea—it’s about knowing how to ask for what you need, when to ask, and who to ask. In Thinking Bigger: A Pitch-Deck Formula for Women Who Want to Change the World, Sarah Dusek demystifies the fundraising process for women entrepreneurs, helping them navigate investor expectations and position themselves for success.
In this excerpt, Sarah breaks down the importance of defining your “ask” and aligning it with the right stage of your business. Whether you’re at the pre-seed stage or gearing up for a Series A, understanding how investors think and how to structure your pitch is key to securing the funding you need to scale.
Read on to learn how to craft a compelling ask, avoid common fundraising pitfalls, and take the next step toward building a high-growth, world-changing business.
I am often asked by entrepreneurs how investors value companies – “what formula is used to calculate a valuation?” The reality is there is a myriad of ways to think about valuation; applying a multiple to your EBITDA (Earnings, Before Interest, Taxes, Depreciation, and Amortization) number, discounting your cashflow and working backward from where we believe your company will be in five to seven years to determine what price can be paid today, are just two of the most common methods. However, even in applying basic formulaic principles, the markets and specifically how confident the financial markets are and how much capital is flowing in those markets will influence valuation. If your business is in an emerging market, for example on the African continent, it is also likely to be valued very differently than a business at the same stage in the United States. Market volatility, currency devaluation, country risk and ease of doing business will all influence valuation. For these reasons and more, appropriately valuing companies can be quite a challenging exercise. Founders should focus on getting their “ask” right, instead of worrying about valuation.
Defining Your Ask
Your entire pitch deck has led to this moment. The unqualified purpose of all the preceding pages of your pitch deck is to successfully position your “ask” to investors, on this final page of your pitch deck. There are three critical elements for every ask:
- X is the amount of money that I need
- Y is how I plan to spend it
- Z is how it will enable us to grow.
Founders often make an ask, but they forget to communicate what they plan to do with the investment or how much growth the investment will help achieve.
It’s easy to say, “I need $1 million dollars,” or to simply pluck a number out of thin air. It’s much harder to say, “I need $1 million dollars, and with it, I will do A, B, and C, and subsequently turn the investment into D.”
On this page, you need to demonstrate that you understand the drivers of putting capital to work in an effective, strategic way and that you are clear about what you need and why you need it. Asking for the right amount of capital is your starting point. Understanding what stage your business is at is the key to this. Have you raised capital before? How much revenue are you doing? If you are at the idea stage and you haven’t generated any revenue and you ask for $5 million dollars you are unlikely to be successful. Pre-revenue companies or companies at the ideation stage are what we call Pre-Seed companies, who at most will be able to raise $25,000 to $500,000 dollars from angels, accelerator programs, or early-stage investors. It is only when you have some traction, a product that is showing some product market fit, and you have moved beyond just being an idea that you can consider raising a “seed round”.
In a seed round, founders can raise anywhere between $200,000 and $2 million dollars depending on traction to date and trajectory. Those funds do not necessarily need to be raised all in one go. We often see founders raising a seed cash injection and then another and maybe another to help bridge them through to raising their next priced round of funding. SAFE notes would likely be the mechanism used for investors to put subsequent seed checks into the business. That million-dollar trajectory is critical because that’s the floor for raising a Series A, the next round of funding after your seed round. If you are doing $1million dollars in revenue then you are eligible to raise a Series A round, where you could raise anywhere from $2 million to $10 million dollars. After that round, the series continues; B, C, and D, and the milestones get larger as do the check sizes.
In summary, the stages of a business’s life cycle correlating to funding cycles are as follows:
- Pre-Seed – often pre-revenue or doing under $50,000 dollars in revenue. Able to raise $10,000 to $500,000 dollars in capital.
- Seed Stage – often doing between $50,000 and $1 million in revenue. Able to raise $200,000 to $2,000,000 in capital.
- Series A – typically doing more than $1 million in revenue. Able to raise $2 million to $10 million.
- Series B & beyond – typically have raised previous capital and are generating more revenue than the Series A requirement.
If you can identify your stage, you can position your ask correctly to the right kind of investors who invest at your stage, and you can ask for an appropriate amount. Investors typically invest in specific stages of a business’ life cycle because they believe they can add the most value at that stage, or they are comfortable with the risk and return profile of companies in that stage. Knowing your stage helps you ask for the right amount from the right people. Even if you know you will need more money soon, investors will struggle to reconcile writing larger checks when you’ve not shown you’ve met the criteria for being a later-stage business. Recognize the stage you are at and do the work to understand what it will take to level up your business to the next stage.
