In my posts about how much capital should be raised from an entrepreneur’s and VC’s perspective, I wrote about the incentives that drive the target size of a given round. However, there is another dynamic to consider: which round of capital is being raised. Later rounds are typically larger than earlier rounds. There are a few reasons for this:

• As the company matures its cash burn rate typically increases (until growth begins to plateau and profits offset burn), creating a need for more capital to take the company to the next milestone. The higher burn rate also means that the company needs more money in order to not have to conduct another raise as soon as they complete this round.
• Mature companies have higher valuations, enabling them to raise more money at a lower level of dilution.