When Should Startups Start Planning to Raise Funds?
- Ritwik Khator
- Nov 3, 2025
- 6 min read
Updated: Nov 20, 2025
At an avg. ~27K startups get registered every year under the govt.'s scheme of Startup India. In comparison, an avg. of ~1,750 startups raised seed funding p.a. in the last 3 years. Between these 2 numbers lies a universe of decision making, timing and effort.
The fact is, fundraising is a full-time job. Convincing new ones and negotiating with the interested ones will take up all of your productive time. Which means that you can’t spend months and months searching for an investor. Rather you do it when you know that the time is right.
So, when is the right time to raise?
If your business idea is a case of sustaining innovation, you’ll find that most probably you’ll fall into the averages of the larger startup ecosystem. That’s because if you have competitors, investors will flock to those first who have higher scale and/or growing faster, ceteris paribus. Which means, the advice here is, that you should first achieve these benchmarks before actually pursuing external funding.
The benchmarks:
We churned data of all the funding that has happened in the last 3 years to arrive at the benchmarks:
Revenue Milestone - this helps you to benchmark the scale, in terms of monthly recurring revenue (MRR), that you need to achieve to raise funds successfully:
Time Deadline - this helps you to benchmark your pace of growth. Therefore, the numbers below may be set as the deadline to achieve the revenue milestone:
Sources: 1 - Startup Indian analysis based on trailing twelve months (TTM) revenue of startups at the time of their fundraise; 2 – Startup Indian analysis
But what if you're a disruptive innovation?
There are no proven comparable out there. You stand alone. In such cases, you’ll find that you’ll mostly be an exception to the above rules. You may need a lot of capital even at the idea stage or you may take years building a prototype before you raise any money.
Put simply, all the exceptions are accepted by investors, if you’re a case of disruptive innovation.
So, when is the right time to raise in such cases?
Remember that when you raise external capital, you’re shifting gears from pursuing your passion to accepting responsibility to give returns to your investors.
Therefore, the golden rule is - if you don’t need capital, you don’t take it.
With that in mind, you need to answer the following questions:
Is lack of capital hurting your business by losing business to competitors/growing at a slower pace than them? OR
Is lack of capital paralyzing your business plans? For e.g., you can’t complete your prototype, or you can’t launch your product if there’s no money.
If answer to any of the above is yes, then raise now. Access to capital let’s you choose your growth rate.
All said and done, there’s one thing for sure, that more capital will always help in, that’s growing faster. So, if all your above tests come negative and you still want to raise because why grow at x if you can grow at 10x, then go ahead and do it.
Should you raise at the Pre-seed stage?
Fact: Majority of the funding at the idea stage come from angel investors.
Also Fact: Between 3-years period pre-covid vs last 3 years - no. of active angel investors and no. of rounds done by angel investors have dropped by 57%.
Why?
Due to a big correction in the funding landscape, after the funding euphoria of 2020 through 1st half of 2022.
Angel Investors have taken a backfoot on investing in startups as an asset class.
Angel investors have moved to investing through Angel funds/VC funds which provide more stable returns and a more hands off approach.
There is a growing emphasis to showcase positive unit economics and clear path to profitability from day 1 to make a case to raise funds. Therefore, angel investors have climbed the ladder to investing in seed/Series A stage.
Put simply- it's more difficult today to raise pre-seed funding from angel investors today vs it was pre-covid.
From VCs- There are many established VC funds that promise capital at the pre-seed stage today. But if you ask us, it's still a difficult climb unless:
You're a Disruptive innovation: Take SatLeo Labs for example. They started in 2023 and raised $3.3M in a pre-seed round led by Merak Ventures. The startup is still in the R&D phase and doing pilot tests of its products. However, their product is what is truly disruptive. SatLeo Labs captures high-impact thermal and optical imaging data from low earth orbit (LEO) via its proprietary technology. This data can be used to analyse the health of crops, measure climatic conditions and avoid natural disasters such as wildfires and for surveillance purposes in the defence sector.
“Thermal imagery from space is still vastly underutilised, and its commercial applications are only set to grow in ways we may not yet fully grasp. We’re backing them (SatLeo) for a genuine tech breakthrough that makes thermal data more useful, accessible and affordable,” said Sheetal Bahl, partner at Merak Ventures via Inc42.
Similarly, AI is the hot sector of investment in 2025. AI-native startups are raising their seed round at an avg. MRR of ₹7Lakh, which is much lower than the broader ecosystem benchmark that we talked about earlier.
You command high human capital: Take Sharad Sanghi for example. Considered as a pioneer of cloud computing service in India, his first venture, Netmagic Solutions- a cloud and data center business- was acquired by Japanese data center major NTT Communication back in 2012. Cut to 2023, he founded Neysa and raised $20M in April'24, led by Matrix Partners India, Nexus Venture Partners, and NTTVC. At that time, Neysa was still PLANNING to offer a suite of Generative AI platform and services, helping clients discover, plan, deploy, and manage their Generative AI projects cost-effectively.
Sectoral benchmarks
We talked about the broader ecosystems’ benchmark numbers before this. While those numbers hold true for most of the sectors, there are some of them where the numbers differ due to their intrinsic nature (only exceptions discussed):
Advanced hardware and tech startups: Take around 6-12 months more than the usual time taken by others to raise their Seed and Series A rounds. At the same time, their avg. MRR is ₹7Lakh at the seed stage, which is much lower than others. Both of these arise as the sector is capital intensive and takes more time to develop its MVP.
Consumer goods and D2C startups: Require MRR of ₹25Lakh at the seed stage and ₹1.5Cr at the Series A stage, both of which are higher than others. This is because most of the brands are functioning in a highly competitive space, usually with low barriers to entry.
Consumer services, Fintech and SaaS: Being evergreen sectors in India, require MRR of ₹13.5Lakh in the seed stage and ₹85Lakh in the Series A stage, both of which are much lower than others.
Finally, what if you're late?
Ps. Here, being late means raising after the benchmark time spans. There are some industries which are naturally having higher gestation periods like we discussed above. Take biotech for example - its median time taken to raise seed round is more than 4.5 years, compared to average of 3 years taken by the rest of the ecosystem. So, what late means for you also depends. Let’s discuss some scenarios:
If you're delaying fund raise plans because you're progressing well with paying customers and still debating whether you need the money, then you can delay as much as possible. You can skip the pre-seed and seed stage and directly raise a Series A round as well. However, keep assessing whether you're growing fast enough by keeping a close eye on your competitors. If your competitors are growing faster/raising money to grow faster, you should too.
Take Koskii for example- It is a Bangalore based internet first brand of ethnic wear for women. Started in 2017, they directly did a Series A round in 2023, making them 5-6 years old. By that time, they reached a revenue of ₹94Cr, getting them a pre-money valuation of - $40M, both of which is way higher than the benchmark numbers.
If you're raising late because you're actually taking longer to get traction and you're getting into a cash crunch, you can expect the valuation multiples to be much lower (1-3 times). Take Ekam Online for example, an online brand of home fragrance products based out of Ahmedabad- they raised their seed round of $158K in June 2023, at a time when they were facing working capital and mounting losses (as per our reading of their financials). Their valuation multiple was only 1.4x.
If you have strong unit economics, raising late does not necessarily mean that you'll have to compromise on the valuation. You can almost definitely expect the question, "why late?" So, you can prepare for it in advance.
Startup Indian can support founders and ventures in the following ways:
Fundraise Preparation - Pitch Deck, Financial Model, When-How Much-Whom to Raise From, Deal Documentation and more. Know more here.
Business Valuation - Adopt multiple methods attuned to startup stage, to negotiate better with investors. Know more here.
Fundraising (as Investment Bankers) - Leverage our network to reach out to investors, lead conversations on your behalf, deal negotiation and closure. Know more here.
Shared CFO - Finance function handholding, top notch governance, internal controls, ongoing financial planning and more. Know more here.
This article featured in our Founder's Playbook which answers questions around startup fundraising - when, how much, at what price, and more. You can access the Playbook here.
