How much should a startup raise? Ask why first
Originally written in Chinese. Translated with AI, reviewed by Gary. Read the Chinese original →
A few days ago I saw a post asking: "How much money should you raise to start a company?"
My first reaction was that the question is backwards. What do you want to do? What problem are you trying to solve? Why is this worth years, maybe more than a decade, of your life? If you haven't thought those through and you're already asking how much money to take, what are you going to do with it once you have it?
Startup "success"
We sometimes joke that you can tell your friends to do anything, but never casually tell them to start a business. There's a popular saying: of 100 companies, 10 are left after five years, and five years later only a tenth of those remain, so you end up with one. That's why people say only 1% of startups "succeed".
What's even funnier is that startup circles have a very clear definition of that "success": the company hasn't closed, and the boss is still there. You might still be in debt, losing money for years, putting your own money in to cover the gaps. From the outside you're still a boss, with a company, staff and business. How you scrape together payroll each month, whether you can sleep at night, how torn up you are inside: that's another matter. If you're still standing after ten years, congratulations, that counts as startup "success" too.
Anyone who has run a business should understand that a company staying alive and its owner doing well can really be two different things. The cost of starting up isn't just the money you put in at the beginning. It's also time, opportunity cost, your family's support, and the pressure you can't really put down even when you get home.
You can't start a business just because it "looks fun", or because you feel you should be a boss for a while. Wanting to make money is fine; I run businesses to make money too. But if you're going to carry all this, you'd better know why you're doing it.
The goal doesn't have to be grand. You don't need to open with changing the world. Maybe you've found a group of customers who can never find the right product, or an industry practice that makes no sense, or a problem you've lived through yourself, so you know it's worth solving.
Once that's clear, you can work backwards: how do you validate the first step? What people do you need? How much capital? At what stage do you go looking for the next round of resources?
Money matters, of course, and some businesses need a fair amount of capital from the start. But how much money you need should follow from what you're trying to accomplish. You don't have to build the whole company on day one. First confirm that someone needs it and someone will pay, then move forward step by step. Fundraising is the same: you need to know what this money will help you achieve, not just how it will keep the company alive a few more months.
The reason behind a tub of plant protein
Recently I came across an American brand called Be Amazing, which makes plant-based protein powder.
When I first saw it, I thought: protein powder, and specifically plant-based? How big is that market? Is it for gym-goers or vegetarians? Then I read their founding story and realised that what was just a product category to me was a very concrete experience for the founders.
One of the co-founders, Mike Yewdell, was diagnosed with Hodgkin lymphoma while he was preparing to start a nutrition supplement business. During treatment he needed extra nutrition, but whey protein upset his stomach, so he tried plant protein. Those products already existed, but he found they tasted terrible. Someone who needed good nutrition having to force down something he disliked every day: that experience stayed with him. Later, together with two friends from university, he focused on making supplements that taste good and that people are happy to keep using.
Even the brand name comes from that experience. The chemotherapy regimen that helped Mike through treatment was called B.E.A.M., which became the inspiration for the name Be Amazing. Look at the brand again and you understand why they care so much about taste and experience. The founder lived through that problem himself.
Of course, conviction doesn't guarantee success. In their first year they nearly went bankrupt too, until an influencer campaign made one product go viral on TikTok and opened things up. Product, marketing, execution, cash flow: they still had to face all of it. What moved me about the story is that they knew why they wanted to solve this problem, and turned that reason into very concrete product requirements.
Get clear first, and the money has a direction
Back to "how much does it take to start a company". I think the questions worth asking yourself first are: what need have you actually found? Why do customers need you? How will you prove, first, that this can work? Once those are clear, the conversation about money and resources has a direction. Otherwise, getting the money may just make a problem you haven't thought through even bigger.
A startup is long, so long that the early excitement will run out one day. When that happens, the business isn't yet what you wanted, but all the pressure has arrived. Will you still be able to say clearly why you keep going?