How Much Funding Do I Need to Get Started?
How Much Funding Do I Need to Get Started?
The process of starting a new business is undoubtedly an exciting one, however, there is a big bump in the road — the first question that you would have to figure out is: how much money is enough? If you do not get it right with the approximations, you may either run out of money or give away a greater portion of the business than is actually needed. This guide will be useful for you in determining the correct amount of investment depending on your business model.
1. Define Your Startup Type
The amount of funding you require for your business is determined by the business type you introduce to the industry. Is it the production of a tech startup, an e-commerce store, or the existence of a service-based business? Usually, the average numbers for different startup models are:
- Tech Startups (SaaS, AI, mobile apps)- $50K to $500K+ (development, cloud hosting, hiring tech talent)
- E-commerce- $10K to $100K (inventory, website, marketing, logistics)
- Service Businesses- $5K to $50K (office space, software, initial team)
Being familiar with the market you are in is half the budgeting battle.
2. Break Down Your Initial Costs
If you wish to find out the amount of money you need, it is wise to put your expenses into different categories, such as:
a) Product Development
- Website/app development
- Prototyping/manufacturing (if applicable)
- Software tools (hosting, analytics, email platforms)
b) Operational Expenses
- Team salaries or freelance costs
- Office space or remote work expenses
- Legal and business registration fees
c) Marketing & Customer Acquisition
d) Miscellaneous & Buffer
- Unexpected expenses (taxes, software upgrades, hiring needs)
- A 15–20% buffer to cover unforeseen costs
3. Estimate Your Burn Rate
Burn Rate equals your Monthly Expenses minus your Monthly Revenue. Your burn rate is the monthly amount you’ll spend before you get your company to the stage of earning profits. A straightforward equation:
Burn Rate = Monthly Expenses- Monthly Revenue
If your startup estimation ranges from 12 to 18 months to reach the breakeven point, it is wise to have a large enough runway to ensure the company can continue to run easily without any stress.
4. Choose Your Funding Strategy
When you know your budget, explore funding options such as:
- Bootstrapping- This is the best method if you have your own source of money and want the freedom to control the process.
- Angel Investors- This works best for early stages, provided they invest $50K-$500K in the project.
- Venture Capital (VC)- It is most suitable for high-growth startups that need funding of more than $1M.
- Crowdfunding- A quite robust option for consumer-facing brands.
- Small Business Loans & Grants- The deal is the best alternative for revenue-generating businesses that are more conservative or less risky.
5. Final Calculation: How Much Should You Raise?
The golden rule to follow here is to raise the 18-month runway+buffer so you can be financially secure.
If your burn rate is $10K/month, then:
$10K x 18 months = $180K + 20% buffer → $216K
You will certainly succeed if you increase your funding to 18 months with a buffer, which will give you enough time to reach key milestones (MVP launch, first customers, early revenue).
Final Thoughts
It is important to note that funding is not only about obtaining money but also obtaining the right amount of money at the right time. Your company can be diluted due to overfunding, while underfunding can be the cause of failure. Be strategic when you raise money and always monitor your burn rate.
Want to Calculate the Cost Of Your Project Instantly?
Success isn’t a guessing game; rather, it’s measurable. Use our Smart Cost Calculator for an instant, transparent estimate for your next software development project. Just answer a few quick questions — industry, project title, platform, features, and design preferences, and our tool will analyze your inputs to provide a cost breakdown, helping you plan better.
At MyNextDeveloper, you can find the top 3% of software engineers who are deeply passionate about innovation. Need expert advice? Book a free session with our founder for personalized insights. Start your journey with clarity — try our Cost Calculator today!
