When To Raise Money
Most startups follow a similar trajectory as described by Paul Graham and Trevor Blackwell (of YCombinator fame) visualised below (screenshot from a Kiss Metrics presentation).
Caveat: If you've raised money for a startup before or founded something interesting previously, raising pre-seed before the "Initial Enthusiasm" curve starts to climb is entirely possible at a valuation you can sort of live with. Also, raising before and after is entirely possible for anyone - but take a wild guess as to how much equity you'll probably have to give up for the deal to close (and how desperate, depressed, or needy you are going to be coming off as when trying to pitch when you're in the "Trough of Sorrow").
Because after the initial rise in your relevant metrics you'll inevitably enter The Trough of Sorrow (where your real work will start) where your metrics will nigh flatline. You can imagine how interesting that is going to look to most investors (even if they know that this is the normal curve).
Keep in mind that the average (successful) B2B startup needs 2-3 years to arrive at a Product-Market-Fit, B2C may be able to to achieve it faster. Ideally (theoretically, but it's not at all always possible due to the uncertain nature of a startup), your Pre-Seed + Seed rounds should last long enough to get you there. Series A rounds and beyond are usually "Growth" or "Scale" rounds, ideally POST-Product-Market-Fit - when you've the stage where you can predictably repeat & scale sales and retain customers (b2b, b2c commerce) or predictably grow & engage (b2c social, "free to use" models).
I've added - in blue below - when you'd ideally be raising pre-, and seed - depending on your location - rounds.
Depending on the time scale of your startup's curve, another position on the curve that could be conductive for raising a Seed round could also be somewhere on an upward inclining curve between "experimenting & pivoting" and "starts working". You definitely want to avoid having to fundraise when you find yourself in a downward moving curve position (when you're literally smelling of desperation and existential angst, giving away your game) - if possible.
Ideally, a good time (terms, energy, and success-rate wise) for raising Series A (scaling / growth round) is on the upward rising trajectory post product-market-fit (PMF).
BTW, how do you know that you have reached Product-Market-Fit? If you have to ask, you haven't reached it - yet:
“Pushing a boulder: don’t have product-market fit. Chasing a boulder: have product-market fit. Both are very demanding but feel totally different. If you’re still pushing the boulder, you don’t have it yet.” —Emmett Shear, CEO of Twitch, partner at Y Combinator
Also, read the essay Ramen Profitable by Paul Graham I mentioned.
