… You want to raise just enough money to solve a small problem for even a smaller set of customers to start with.
A lot of ventures start with a dream, a vision; to solve a problem in a specific 
way. The dream could be a INR 100 crore product or something as complex as an ERP on the web to a even more complicated, a Hospital Information Systems (.. search engines? they are easier to build these days).
The vision cannot be achieved in 6 months or even 2 years — Takes 5-7 years on an average to build an INR 100 crore company. So you want to start now, and want to start small, chiseling your idea, refining as you go, adding feathers in your cap and changing gears and accelerating as you move.
First, zero in on a handful of customers and a specific problem the customer may have. Do not worry if others mock you for building a feature & not a product. You know your destiny. You know where you want to reach. Validate what you have built. Give the customer something useful so that he can pay for what you have built. Iterate on your product.
There are a lot of examples where the companies started small and began by solving just one small problem and then morphed into gorillas; from companies selling PCs — to cloth merchants now with fully backward integrated perto-products chain.
A large amount of money spoils you, ties you up with your own experiments and forces you to deliver a product which does not have any takers outside your laboratory — You are forced to linger with the experiment because now you have a large amount of an external investor’s money and do not have guts to tell him that it is not working out. There are numerous examples. There are only a few brave entrepreneurs who took $5m only to tell the board in less than a month about change in the business model.
When you are starting out, you are building something and proving your hypothesis. The moment someone starts paying for what you are building, a part of the hypothesis gets proved. You continue to iterate.
Think 6 months, 3 people’s expenses.
Think 6 months, 2 people’s expenses.
Think the amount of first tranche you need to deliver to your first customer.
Think about knowing the sales process yourself before hiring a sales expert.
Think doing zero dollar marketing before doing SEM campaigns.
Think writing the code yourself before hiring a developer.
… start thinking about raising big money after your customer trusts you with his money.
(The thumbnail is of a Ruby-throated hummingbird. These are solitary. Have one of the highest metabolism, and as part of their migration, they fly non-stop across the Gulf of Mexico, a distance of at least 500 miles. Pic courtesy)
As a Founder, CEO, whatever of the startup — one thing you would be doing in your journey would be 
Moreover, working together for some time helps people gauge the ‘mutual fit’ before signing each other up for 4-5 years. It is quite possible that after sometime a few members of the team decide to mutually part way and move-on. The question pops — what/how much would be the compensation if things do not move forward into a formal agreement? How much should be the compensation for the person who has worked his ass off but now thinks that he needs to move on?