to execute its business plan. Venture capital should bring a company to clearly identified milestones at which point additional capital will be required to expand the company. Many entrepreneurs underestimate the amount of capital required, and some purposefully raise too little capital to avoid significant dilution of their equity. Either way, venture capital should not be used to put out fires or catch up from senous overspending during the current round. It is probably easier said than done, but the financial projections have to be very thoroughly thought through, which is very hard with an early-stage company. Even assuming that your projections are fairly accurate, too many unforeseen things can happen that would require an adjustment in your projections. Hence, I think it pays off to readjust projections and models very frequently to get a true sense of what is happening with the company at any given point. Entrepreneurs almost always need more money than they expect, so a good rule of thumb is to raise at least 25 percent more capital than you anticipate. However, this is a tough call when this 25 percent can raise very significant and unnecessary (from the entrepreneur's point of view) dilution. I don't know if there is truly a good way to go about this other than to be realistic about capital needs and to not raise a penny less than needed to achieve the next milestone (or the milestone that is required to allow the company to increase its valuation and raise further capital). Recent Changes There is no doubt that the late 1990s were filled with irrational and unrealistic venture transactions. The most significant trend, one that still has a large impact on venture capital today, is exponential growth in the average size of venture funds. For a short time, after the closing of the first billion-dollar venture funds, it seemed as if there was no end to prospenty. After the market crash, most venture firms returned committed capital to their limited partners due to a lack of investment opportunities: It was no longer easy to invest $1 billion over the course of five years while still focusing on diverse early-stage opportunities. Venture capital firms either had to find several dozen investment opportunities for each fund or had to increase investment size significantly, diverting their focus toward later- 34