As much as I can get! This would be the answer readily shouted out by most entrepreneurs. The fact is though, both over and underestimating the amount of capital needed to fund a business can have serious negative consequences.
Underestimating what you need can cause problems ranging from having to go through the whole time consuming fund raising process again, to having to shut down the company because funds have run dry. Having to go back to the original investors and ask for more money often undermines the entrepreneur’s credibility with the investors and can cause a significant dilution in the founder’s ownership.
Obtaining more than enough capital may seem like a blessing at first, but it can breed a lax attitude toward expense control. “If you have it, spend it,” is not an advisable motto for a new company. If the investment takes the form of equity, raising too much money means that the founder’s share of the business was reduced more than was necessary–and this violates one of the maxims of entrepreneurship: hold on to those equity points!
Typical advice given to entrepreneurs is to do a cash flow projection, or...
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