Milestone Funding for Entrepreneurs

Entrepreneurs seeking funding might want to spend some time learning the language, terminology, and insights used by funders. While the language of funders might look similar to everyday language — no matter what language you speak — in reality, there are codes and code words specific to each industry.

Let’s dive into one example: Milestone Funding.

Also known as Conscious Funding, the term Milestone Funding is widely used by both Angel Investors and Venture Capitalists. Considering what Milestone Funding shows you, it is a great approach for entrepreneurs to take with their own money.

Milestone Funding breaks down to five steps:

  1. Know the exact amount you need in total.
  2. Know how much you need for each phase of the funding time period.
  3. Know how the funds will be used during each time period.
  4. Know the specific milestone or accomplishment you will meet in that time period.
  5. Know the source of funding for the time period.

Here is an example:

  1. I need $100k in total to launch Product A.
  2. I need $20k over the next 90 days to build my prototype, which I will personally fund.
  3. In six months, I will need an additional $40k for beta testing and the collection of feedback from customers or partners in preparation for deploying the product. This funding will come from the partners, and partially from customers.
  4. At the 9 month mark, I will need an additional $25k to build a small inventory of the product. I seek outside funding for that amount.
  5. At the 12 month mark, I will need an additional $15k to scale up operations and create marketing and sales tools. I seek outside funding for this amount as well.

Do you need funding? If so, considering the Milestone Funding approach as a guide, you should be able to answer this question:

how much money do you need, by when, for what purposes, enabling you to do what?

Faris Alami is Founder and CEO of International Strategic Management, Inc. (ISM). He works internationally, presenting Exploring Entrepreneurship Workshops and other entrepreneurial ecosystem ventures.