Every founder preparing to raise asks the same question: how much should I raise? The standard answer—enough for 18-24 months of runway—has become so ingrained that it’s treated as law. Calculate your burn rate, multiply by 18, add a buffer, and there’s your number.
This framing is incomplete. It treats fundraising as a purely internal exercise, a math problem involving only your company’s expenses and milestones. What it misses is that you’re not building your company in isolation. You’re operating in a market with competitors, some of whom may be raising capital at the same time, making strategic bets that will directly affect your ability to win.
The question isn’t just “how much do we need?” It’s “how much do we need relative to the competitive landscape we’re entering?”
The Conventional Wisdom and Its Limits
The 18-24 month runway rule exists for good reason. It gives you 12-15 months to hit meaningful milestones and 3-6 months to raise your next round before running out of cash. Leo Polovets of Susa Ventures articulated this clearly: if you raise less than 18 months of runway, “there’s a large risk that you’ll run out of money before you make enough progress to raise your next round.”
Current market data supports even longer runways. With only 15-20% of 2022 seed-stage startups successfully raising Series A—down from 40-50% in better years—investors now expect founders to demonstrate more traction over longer periods. JPMorgan and other advisors have shifted their guidance toward 24-36 month plans, acknowledging that fundraising timelines have stretched and investor selectivity has increased dramatically.
But here’s what the runway calculation doesn’t capture: your milestones don’t exist in a vacuum. If a competitor secures significant funding while you’re executing a lean validation strategy, the milestones you planned to hit may no longer matter. The market you were validating might be captured before you finish validating it.
This is where competition theory becomes directly relevant to fundraising strategy.
Competition Theory Applied to Fundraising
Competition theory, in its simplest form, examines how firms behave when rivals exist in their market and how that rivalry affects strategic decisions. Applied to fundraising, it means your raise size and valuation should be strategic responses to the competitive environment—specifically, how many competitors exist, how well-funded they are, how quickly they can move, and how differentiated your product actually is.
Two almost opposite strategies emerge from this analysis.
The first is the conservative path: raise less, prove the market, de-risk the story, and return later for a larger round at a better valuation. This approach minimises dilution now and builds negotiating leverage through demonstrated traction.
The second is the aggressive path: raise more, move faster than competitors, and lock in customers, partnerships, and market position before others can catch up. This approach accepts more dilution today in exchange for a better chance of winning the market.
The mistake most founders make is choosing between these strategies based purely on personal preference or philosophy about capital efficiency—without analysing which strategy the competitive landscape actually demands.
When Raising Less Makes Sense
The conservative approach works well under specific competitive conditions. If there are few or no well-funded competitors in your space, you have time on your side. The urgency to move fast diminishes when no one else is racing toward the same opportunity.
If your customers move slowly—long enterprise sales cycles, conservative industries, regulatory approval processes—then speed of capital deployment matters less than quality of execution. A competitor with twice your funding can’t accelerate a 12-month enterprise sales cycle just by spending more on sales reps.
Most importantly, if your biggest risk is market risk rather than competitive risk, a smaller round makes sense. When the fundamental question is “does anyone actually want this product?” rather than “can we outpace competitors to capture demand we know exists?”, proving demand before scaling is the rational choice.
In this scenario, a founder might deliberately raise a smaller round—say, €500K to €1M—to validate their pipeline before pursuing a larger Series A. The logic is sound: lower dilution now, stronger story later, better valuation once the market risk is de-risked.
Fred Wilson of Union Square Ventures has been vocal about this dynamic: “The fact is that the amount of money startups raise in their seed and Series A rounds is inversely correlated with success. Less money raised leads to more success.” His point isn’t that capital is bad, but that raising too much before you know what to do with it leads to premature scaling and misallocated resources.
When Raising More Is Actually Safer
The inverse scenario is equally important and less intuitive. Sometimes, raising a small round is the riskier choice.
If a competitor is raising large rounds—tens of millions—they can deploy that capital to capture market share, lock in key customers, secure distribution partnerships, and hire talent you’ll need. If your product is similar enough that customers might choose between you, and if switching costs are low, letting a well-funded competitor establish market presence while you’re still “validating” could be fatal.
The Going Long analysis of competitive funding dynamics puts it bluntly: “In markets where competition is intense and barriers to entry are low, you risk falling too far behind a competitor who has deeper pockets. Conversely, if you’re able to raise more than your competitors, you can beat them by locking down key marketing channels, developing distribution and hiring the best execs.”
This is particularly true in markets with network effects, where early scale advantages compound. In winner-take-most markets, the cost of being second isn’t a slightly smaller outcome—it’s often zero.
The paradox is that under these conditions, a small round feels responsible but may actually be reckless. You’re conserving dilution on a company that won’t exist if a competitor captures the market while you’re proving product-market fit.
The Undercapitalisation Risk
NEXEA’s analysis of competitive funding dynamics captures this tension well. When a competitor raises significantly more capital, “many investors will tell you to rush your funding to compete in the market. They say you need to raise more to fight.” But they also note that “many startups have gone down this path and paid the real price when revenues do not follow expenses.”
The key insight is that undercapitalisation isn’t just about running out of money—it’s about running out of competitive position. If you raise enough to prove the market but your competitor raises enough to capture the market, you’ve successfully validated demand for their product.
The 2024-2025 data on seed-to-Series-A conversion rates makes this stark. Crunchbase found that companies raising around $300K at seed were approximately 65% less likely to raise Series A than companies raising $900K or more. Part of this is selection bias—stronger companies raise more—but part of it is that undercapitalised companies simply can’t execute at the pace required to demonstrate Series A-worthy traction.
Using Benchmarks to Ground the Decision
This is where data becomes essential. Competitive strategy without market context is just speculation. You need to know what comparable companies are actually raising, at what valuations, and at what stage of development.
Equidam’s benchmarking tools are particularly useful here because they allow you to filter by industry, geography, and stage. You can see not just average valuations but the distribution of valuations and round sizes for companies similar to yours. This provides several concrete inputs for your decision.
First, you can sanity-check your valuation range. If your model suggests a €12M valuation but benchmarks for similar-stage, similar-industry companies cluster around €5-8M, you have important information. Either you have genuinely differentiated characteristics that justify the premium, or your projections are too aggressive. Both are worth knowing before entering investor conversations.
Second, you can understand typical round sizes for your competitive set. If comparable companies are raising €1-3M at seed, and you’re considering a €300K round, you need to ask whether your conservative strategy accounts for how competitors will use their larger war chests. Conversely, if you’re planning to raise €5M while peers raise €1-2M, you need a clear justification for why you require more capital—and investors will expect one.
Third, you can calibrate the ambition in your financial projections. Benchmarking isn’t just about valuations and round sizes; it’s about understanding realistic growth trajectories and margin expectations. If your projections show minimal growth for three years followed by explosive 50%+ EBITDA margins, that pattern will look suspect relative to what comparable companies actually achieve.
A Practical Framework
Pulling these threads together, a competition-informed fundraising decision follows a specific analytical path.
Start by mapping your competitive environment honestly. How many serious competitors exist? How funded are they? How quickly can they scale? How substitutable is your product? If you don’t know the answers to these questions, find out before you decide how much to raise.
Next, define your strategic posture. Are you pursuing a conservative validation round—proving the pipeline, reducing risk, building leverage for a stronger Series A? Or are you pursuing an aggressive scaling round—racing to market leadership, locking in position before competitors can respond? Both strategies can work, but they require different amounts of capital and produce different risk profiles.
Then use benchmark data to anchor your assumptions in reality. Check typical valuations for your industry, geography, and stage. Examine typical round sizes. Compare your projections to what similar companies actually achieve. Use this data not to copy market averages but to understand where you sit relative to them—and to justify your position.
With this analysis complete, adjust your model and narrative accordingly. Fix obvious technical issues. Bring extreme projections closer to benchmark-consistent levels. Decide where in the distribution you want to sit and build a story that justifies that position based on your competitive dynamics.
Finally, articulate your raise strategy explicitly. “We are raising €X at a valuation of €Y. Benchmarks for similar companies fall in the €A-C range; we chose €Y because [specific rationale]. We considered competitive dynamics: there is [limited/intense] competition, so we chose to [raise lean to prove the market/raise more to establish position].”
The Strategic Shift
The core reframe is simple but important. The question “how much should we raise?” becomes “how much do we need to win given our competitive landscape?”
For some founders, this analysis will confirm that a lean validation round is appropriate. The competitive pressure is low, the market risk is high, and proving demand before scaling is the rational strategy.
For others, it will reveal that their conservative instincts are mismatched to their competitive reality. A well-funded competitor is already moving, the market has winner-take-most dynamics, and raising just enough to validate means validating the opportunity for someone else.
The conventional runway calculation—18-24 months of expenses—remains a useful floor. You shouldn’t raise less than that except in unusual circumstances. But it’s not a ceiling, and it’s not a strategy. It’s a starting point that competition analysis builds upon.
Valuation and raise size are strategic decisions that should emerge from your competitive context, not just your expense projections. The founders who understand this enter negotiations with a clearer story and a more defensible position—because they can explain not just what they need, but why they need it given the market they’re competing in.
Build your funding strategy on data, not guesswork. Equidam’s benchmarking tools let you compare your valuation, round size, and projections against companies in your industry, stage, and region—so you can make raise decisions grounded in competitive reality.