How Much to Raise at Pre-Seed and Seed: The Dilution Math That Decides Your Next Round

Ask ten founders how much they're raising and eight will give you a number that came from somewhere other than their own numbers — a demo day pitch they admired, a friend's round, or "what feels right" for the stage. Ask why that number and not $200K more or less, and the confidence usually drops fast.

That's the tell. Raise size isn't a vibe. It's the output of a calculation — milestone, runway, burn, buffer — and the founders who skip the calculation don't just risk asking for the wrong amount. They risk giving away more of their company than the money was worth, and setting up their next round to look worse than it should.

This is the one post in this series that's just about the number. Not the deck, not the investor list, not the follow-up — the raise itself, and the dilution it costs you.

How Are Raise Size, Valuation, and Dilution Actually Connected?

They're not three decisions. They're one equation with three variables, and fixing any two sets the third automatically.

Dilution is the percentage of the company new investors own after the round: raise amount divided by post-money valuation (pre-money plus the raise). Say "we're raising $1.5M" and "we're worth $8M pre-money" in the same breath, and you've already decided the dilution — about 16% — whether you did the arithmetic or not. Say "we're raising $2M" and "we won't go below $6M pre" and you've decided on 25%, which is a materially different outcome for a business at the same stage.

Most founders talk about raise size and valuation as if they're independent negotiating points. They aren't. They're the same conversation, and the dilution number is what falls out of it. If you want the full formula set — implied dilution, valuation-to-ARR multiple, burn multiple — we've published those in detail elsewhere on the blog and walk through applying them in NUVC's free AI Academy. This post is about the decision those formulas feed: how big should the round actually be.

Size the Round to a Milestone and 18 Months — Not a Number That Sounds Fundable

The right raise size is whatever gets you 18 months past close to a credible next-round milestone, with a buffer for the things that always run long. Not a round number. Not what the last founder you talked to raised. A specific answer to: what does this company need to be provably true in 18 months for the next round to be an easy yes?

Eighteen months is the anchor for a reason. Twelve months and you're back in the market before you've fully proven the milestone you raised for — pitching from a position of "almost there" instead of "done," which is a materially worse negotiating position. Twenty-four-plus months and you're diluting yourself now for a use of funds two years out that you can't credibly justify yet, and locking up ownership for progress nobody can underwrite today.

The mechanical version: raise ≈ monthly burn × 18, plus a 20–30% buffer. That buffer isn't padding to make the round feel bigger — it's insurance against the two things that reliably take longer than planned at every stage: hiring the people in your plan, and closing the pipeline your revenue projection assumes. Both take longer than founders budget for, every time, without exception worth planning around.

If you want a sense of what that number tends to look like before you run your own math — current AU round-size benchmarks by stage — we've published the AU funding benchmarks separately. This post is the dilution math underneath that number, not a replacement for it.

What's a Healthy Dilution Target — and Why 10–20%?

Dilution compounds, and most founders only feel the compounding after it's too late to change it. A round that dilutes you 20% doesn't cost you 20% of your company over a career — it costs you 20% of whatever you're still holding, every time you raise again.

Dilution per round	Founder ownership after 3 rounds
15%	~61%
20%	~51%
25%	~42%
30%	~34%

That table is investor dilution only, and it flatters the picture — because it leaves out the option pool, which in Australia is the bigger bite of the two.

The ESOP Carve-Out Australian Founders Consistently Underestimate

Airtree, one of Australia's largest early-stage funds, publishes its own guidance openly: it expects an employee option pool of 10–15% of the company at seed and Series A. That is not a rounding error on top of a 20% round. It is comparable to the round itself.

The part that decides who actually pays for it is a single line in the term sheet: whether the pool is created pre-money or post-money. The standard ask is pre-money — the pool is carved out before the new money lands, so it dilutes founders and existing shareholders and leaves the incoming investor's percentage untouched. Same headline valuation, quietly different cap table.

Run it through: establish a 12.5% pool pre-money, then sell 20% to the round. Founders don't end round one on 80%. They end on 67.5% — pre-money means the pool and the investor's stake are both fixed shares of the post-money company (12.5% and 20%), so founders alone absorb both: 100% − 20% − 12.5% = 67.5%. The first round costs founders roughly 33 points, not 20.

Carried forward, with a modest 5% top-up at each of the next two rounds:

After	Investor dilution only	With an Australian-typical ESOP
Round 1	80%	67.5%
Round 2	64%	51.3%
Round 3	51%	39%

A twelve-point gap, and it lands almost entirely on the founders. The clean 51% figure is the number founders quote to each other. Roughly 39% is the number that shows up on the cap table.

What the Pre-Money/Post-Money Line Is Actually Worth

Most founders negotiate the pool's size and accept its placement without comment. The placement is the more valuable of the two, and it's possible to put a precise number on it.

Take one round: $8M pre-money, $2M raised, $10M post — so the investor buys 20% — with a 12.5% pool. The only variable is where the pool is carved from.

Pool created	Founders	Pool	Investor
Pre-money (the standard ask)	67.5%	12.5%	20.0%
Post-money (what to ask for)	70.0%	12.5%	17.5%

Same valuation, same round, same pool. The founders are 2.5 points better off, and the number isn't arbitrary: it is exactly the investor's share of the pool — 20% × 12.5% = 2.5 points. A pre-money carve-out hands the incoming investor that slice for free, because it inflates the share count used to set the price per share while leaving their percentage untouched.

Which is why the placement is worth more attention than the last point of valuation. Arguing pre-money up from $8M to $8.3M is a harder conversation with a smaller payoff than moving one word in the term sheet. If the pool has to sit pre-money — and often it does — the fallback is to shrink it honestly: size it to a real 12–18 month hiring plan rather than to a convention, and revisit at the next round. Every point you don't pre-fund is a point you keep.

The wider takeaway: this is why 10–20% investor dilution per round is the range worth defending. It's what keeps founders and early team meaningfully ahead of the halfway line through Series B once the pool is accounted for. Motivation over a seven-to-ten-year hold is a real input to outcomes, not a sentimental one.

A note on pre-seed specifically: SAFEs make dilution feel deferred because there's no priced round yet, just a cap. That's precisely why it's worth modelling your cap-table dilution honestly at pre-seed, before it's locked in at conversion — a generous cap today is a real percentage tomorrow, it's just not on the cap table yet where you can see it.

Over-Raising Is a Tax, Not a Trophy

A bigger round announcement feels like a win. The two costs it actually carries rarely get named out loud.

The first is straightforward: dilution for capital you don't need yet is dilution you paid for nothing. The second is behavioural, and it's the one that does more damage — money that's already in the bank changes how it gets spent. Burn creeps up to meet the runway available rather than the milestone required, hiring plans expand because the budget allows it rather than because the roadmap demands it, and discipline that would have held at a tighter number quietly loosens. Founders rarely notice this happening in real time. They notice it at the next fundraise, when burn has grown faster than progress.

There's a third cost that's easy to miss: raising a bigger round at a stretched valuation to keep the dilution percentage low doesn't avoid the tax — it just moves it downstream. It sets a higher bar for the next round to count as a genuine up round, because the growth required to justify a markup on an already-generous number is steeper than the growth required to justify a markup on a fair one.

What a Bloated Round Signals to Your Next Lead

A new investor isn't just underwriting the company. They're underwriting the round that got the company here — and a round that's two or three times oversized relative to what it demonstrably bought is a specific, legible flag, not a vague one.

The question a Series A lead asks isn't "did they raise a lot at seed." It's "did they convert that capital into proof efficiently, or did the money buy time and headcount without buying evidence." A company that raised $3M at seed and has thin traction to show for it reads differently than a company that raised $800K and hit the same milestones — even if the second company's absolute numbers are smaller. Capital efficiency is a signal about how you'll run the next round's money too.

There's a cap-table mechanic underneath this as well. An oversized seed round, especially one stacked with SAFEs at generous caps, converts into more Series A dilution than a lean one — which eats into the incoming lead's target ownership, or pushes them to ask for a bigger allocation than they'd otherwise want, or to walk. A bloated round doesn't just cost the founders who raised it. It becomes the next investor's problem to solve, and investors notice when they're being handed someone else's overspend.

The Venture Math Investors Assume You Already Did

Here's the part most founders miss entirely: the exercise of working backward from milestone to runway to burn to buffer isn't just how you should size a round — it's a test investors are quietly running when they ask "how much are you raising, and why that number." An answer that starts with a milestone and ends with a figure reads as a founder who's done the math. An answer that starts with a figure and works backward to justify it reads as one who hasn't.

The deeper venture math — implied dilution, burn multiple, valuation-to-revenue multiples, the Rule of 40 — is what experienced investors are running in their heads within seconds of your financials slide, whether or not you show your working. We've laid out the exact formulas and stage benchmarks for those in a dedicated piece on the blog, and NUVC's free AI Academy has a full class on running your raise that walks through applying them to your own numbers. This post is the layer above that: the decision those formulas are meant to inform, not replace.

Three Questions Any Raise Number Should Survive

Before you put a figure in your deck, it should survive three questions, out loud, to someone other than your co-founder:

• What specific, provable milestone does this money buy? Not "growth." A number — users, revenue, retention, a signed pilot — that a stranger could verify happened.
• What percentage of the company am I giving up to buy it — and is that inside 10–20%? If the answer is no, the round is either too big or the valuation is wrong. Fix one before you fix the other.
• What does this round's size and my burn discipline signal to whoever has to say yes to my next one? Every round you raise is a reference for the next investor, whether you intend it to be or not.

If the number you're about to write down doesn't have a clean answer to all three, it isn't ready to go in the deck yet — no matter how confident it sounds when you say it out loud.

Frequently Asked Questions

How much should I raise at pre-seed?

Enough to cover 18 months of burn to your next credible milestone — typically a working product plus early demand signal — plus a 20–30% buffer for hiring and pipeline delays. Work backward from the milestone, not forward from a number that sounds impressive at a demo day.

How much should I raise at a seed round?

The same logic, at a bigger number: 18 months to your Series A milestone (usually meaningful revenue or engagement traction plus retention evidence), sized to the actual burn a slightly larger team requires. The mistake at seed is the same mistake as pre-seed, just with more zeroes attached.

What's a healthy dilution percentage per funding round?

Roughly 10–20% per round. Below that, you likely need an unusually strong negotiating position. Above 25–30%, dilution compounds fast enough across rounds that founders can end up holding well under half the company by Series B, and each subsequent round gets harder to justify at a step-up valuation.

What happens if I raise too much at seed?

Three costs, not one: extra dilution for capital you didn't need immediately, burn discipline that loosens because the money is there, and a higher valuation bar for your next round to read as a genuine up round rather than a flat one.

Should I just raise more to be safe and extend runway past 18 months?

Not by default. Runway well past 18 months usually means dilution paid today for a milestone you can't yet specify — and it can read to your next lead as a company that raised for comfort rather than for a plan. If you have a specific reason to want more runway (a long enterprise sales cycle, a regulated market), name it explicitly rather than padding the number quietly.

Every one of these numbers gets easier to reason about once you can see your own deck the way an investor does. Upload your deck to NUVC for the scoring, benchmarks, and venture math investors are already running against you — before you're in the room.