in raising capital is to understand how much capital you need to raise. Successful businesses anticipate their future cash needs, make plans and execute capital acquisition strategies well before they find themselves in a cash crunch. Three axioms guide start-up fund raising: As businesses grow, they often go through several rounds or stages of financing. These rounds are targeted to specific phases of the company's growth and require different strategies and types of investors. Raising capital is an ongoing issue for every venture. Capital acquisition takes time and needs to be planned accordingly. Four critical determinants of the financial need of a venture are generally distinguished: Determination of projected sales, their growth and the profitability level Calculation of start-up costs (one-time costs) Estimation of recurring costs Projection of working capital (inventory, credit and payment policies. This determines the cash needed to maintain the day-to-day business) Typically, venture capitalists are part of a fund. Their average size in Europe includes five investment professionals and two supports. They generate income through management fees (on average 2.5% annual commission) and carried interest ("Carry", on average 20–30% of the profits of the fund). Valuation in entrepreneurial finance Financial planning also helps to determine the value of a venture and serves as an important marketing tool towards prospective investors. Traditional valuation techniques based on accounting, discounting cash flows (Discounted cash flow, DCF) or multiples do not reflect the specific characteristics of a start-up. Instead, the venture capital method, the First Chicago or the fundamental methods are usually applied. Venture capital method To determine the future value of a start-up, a venture capital investor is guided by the question: What percentage of the portfolio company should I have at exit to guarantee that I get the IRR committed with my investors? The valuation of the future company can be broken down into four steps: Determination of company's value at exit Requested fraction (percentage) of the VC at exit? Number of shares to be bought in the current round of financing to get the desired percentage of the company Estimation of maximum price per share willing to pay in current round of financing Usually there is more than one round of financing. Venture capital investors generally prefer staged investments to reduce the money invested at the higher risk and control entrepreneurs via milestones. Entrepreneurs benefit from dilution in future rounds by reducing the price of the shares