In general, I agree with cdixon that a startup should raise as much money as possible. However, due to the difference in mentality and capital available, we Europeans might have a different take on the reasons for that.

If you are looking for a first round investment (i.e. not angel money), raising an amount that takes you beyond deploying your product to market and achieve first revenue is likely going to be pretty hard in Europe (or at least harder than in the US). The reasons lie mainly in the size and number of funds in Europe: there are only a few VCs actually pursuing the real seed stage and if they do, their funds are way smaller than in the US (reasons can be found here). Hence, structuring the investment amount is considered equal to minimizing the amount of risk at hand while increasing the ability to pursue more investments over the same period of time. This is opposite to the behavior of American VCs that like to deploy as much cash as necessary to get you to exit.

The following graph illustrates this mentality [Disclosure: this is an example; any similarities to real funds are unintentional and coincidental]:

While the blue arrows denote capital injections due to achieved milestones, the green one might not have been possible without the failure of Venture 2 and/or Venture 4 (the red arrows indicate milestones that were not hit and hence, not additional capital injection was necessary).

How is the European perspective different from the American: generating first revenue and using that cash to grow?

First, earning $100 is not going to get you through the month. But I proves that customers are willing to pay for your product. No matter how much you want to raise, this fact alone will increase your valuation and the likelihood for raising an additional round–maybe with someone else.

Second, let’s assume you will generate those first pennies in 6 months. That is a long time for a startup. So, it is not uncommon for startups to switch their business models upside down a couple of times before they finally find the right monetization strategy. Hence, you better have more cash than what you got from your first sales.

Europeans like to structure their investments and tie those cash inceptions to milestones. So, every time you are hitting one of those milestones, you are supposed to receive another tranche of cash.

Therefore, unless you have already sold your business, you are constantly seeking investors. I refer to this as a dance that never stops unless you don’t feel like you know what business you are pursuing or have successfully exited your venture.