It’s not uncommon for entrepreneurs to try to raise all of the money that their company will ever need in one round. They are a few good reasons to try to do this. Primarily they do this to:

1. ensure that they’ll have enough capital - fundraising in the future may be difficult, and
2. avoid spending more time fundraising in the future.

There are, however, two key reasons to break your fundraise into tranches.

First and foremost, if your company needs a lot of capital over its lifetime it may be difficult to assemble a syndicate of VCs willing to invest the target amount of capital. VCs typically have limits as to the size of their initial investment, meaning that to raise a sum that significantly exceeds those limits you may need to seek capital from non-traditional early-stage investors, who often do not understand the venture model and fail to help startups reach their potential or raise money from numerous venture investors.

The challenge with the latter option is that most VCs have target percentages of the company that they expect to own for their investment. As a result, if you try to create a syndicate with too many VCs, the structure will not work. Either the VCs will collectively own a lot of your company (leaving you with too little) or the VCs will not meet their target ownership levels and likely opt not to participate. Structuring a venture deal is a balancing act – taking anything to the extreme rarely works.

The second reason why pursuing a multi-round fundraising strategy may help you is because it may enable you to own more of the company. Simply put capital raised when the company is more mature will likely be raised at a larger valuation, meaning that your stake is diluted less by each additional dollar that you raise.