Raising money is one of the first big hurdles most founders face. This Startup Funding Guide walks you through funding stages, who writes the checks, what investors care about, and practical steps to move from idea to seed funding. If you’re starting out (or advising a founder), you’ll get clear, usable advice—no fluff, just the road-tested stuff I’ve seen work.
How startup funding works: the basics
Startups raise capital to speed growth, hire talent, build product, and reach customers. Funding isn’t magic; it’s a series of transactions where founders trade equity (or debt) for cash and often investor expertise.
Common funding stages
- Pre-seed: Idea validation, founder-run, often friends & family or micro-angels.
- Seed: Product-market fit experiments, early users, angel investors, seed funds.
- Series A: Scalable growth, unit economics, institutional venture capital.
- Series B and beyond: Scaling, market dominance, growth-stage VCs and strategic investors.
Who invests at each stage
- Bootstrapping & founders: early traction.
- Angel investors: early checks, often sector specialists.
- Seed funds & accelerators: structure and network.
- Venture capital: larger checks, board involvement.
- Crowdfunding & revenue-based financing: alternative non-dilutive or hybrid options.
Choosing the right funding source
Not every investor is right for you. I think founders too often chase the biggest check and forget alignment. Ask: who adds strategic value? Who will help hire, open doors, and stick around when things are hard?
Quick comparison table
| Source | Typical Check Size | Speed | Equity/Dilution | Best For |
|---|---|---|---|---|
| Bootstrapping | Self | Fast | None | Early churn testing |
| Angel | $10k–$250k | Medium | Low–Medium | Product building |
| Seed funds | $250k–$2M | Medium | Medium | Early growth |
| VC | $2M+ | Long | High | Scaling fast |
| Crowdfunding | Varies | Fast | Variable | Community-driven products |
How investors evaluate startups
Investors use a mix of qualitative and quantitative checks. From what I’ve seen, the emphasis shifts by stage: early bets are on team and vision; later rounds demand predictable growth.
Top criteria
- Team: Complementary skills, conviction, coachability.
- Market: Large, growing market with clear pain points.
- Traction: Users, revenue, retention—evidence the idea resonates.
- Product: Differentiation and defensibility.
- Unit economics: CAC, LTV, and profitability path.
Term sheet basics and valuation made simple
Term sheets can feel like lawyer-speak. Focus on a few core items: valuation, liquidation preference, option pool, and board composition. Those move the needle most on control and outcomes.
Key terms to watch
- Pre-money valuation: Your company value before the new money.
- Liquidation preference: Who gets paid first in a sale.
- Option pool: Equity reserved for hires—dilutes founders unless negotiated.
- Pro rata rights: Allow investors to maintain ownership in later rounds.
Valuation quick guide
Valuation is part art, part data. Early on, comparable rounds, traction and team reputation matter most. Don’t overprice yourself—raising at a reasonable valuation is often better than holding out and failing to hit milestones.
Pitch deck and fundraising process
A crisp pitch deck still opens doors. Keep it tight—10 slides that answer the critical questions. I usually tell founders: be ruthless. Cut fluff.
Essential slide deck outline
- Problem — who hurts and why.
- Solution — your product and why it’s unique.
- Market size — TAM/SAM/SOM (simple numbers).
- Traction — metrics, users, revenue, growth.
- Business model — how you make money.
- Go-to-market — acquisition channels and cost.
- Competition — honest landscape and your edge.
- Team — founders and key hires.
- Financials — 12–24 month roadmap and runway needs.
- Ask — how much you want and what you’ll achieve with it.
Fundraising timeline (realistic)
- Preparation: 2–4 weeks (deck, financials, target list).
- Initial outreach: 2–6 weeks (meetings, follow-ups).
- Term sheet to close: 4–8 weeks (negotiation, diligence, legal).
Practical tips founders miss
Small things matter. I’ve seen great companies stumble on basics—bad decks, weak data rooms, or wrong investors. A few practical moves can make fundraising far less painful.
Practical checklist
- Build a tidy data room: cap table, financials, customer references, IP documentation.
- Warm intros beat cold emails—use your network (LinkedIn, alumni, investors you’ve met).
- Tell a simple story: your narrative should be repeatable in one sentence.
- Negotiate the full economics, not just headline valuation.
- Plan runway conservatively—aim to raise with 12–18 months of runway after close.
Alternatives to equity funding
Equity isn’t the only path. Non-dilutive or hybrid options can be smart depending on your business model.
- Grants: From governments or foundations—great if you qualify.
- Revenue-based financing: Pay back as a percentage of revenue.
- Convertible notes / SAFEs: Quick, founder-friendly early instruments.
- Crowdfunding: Product-market validation and customer capital.
Real-world example (short)
I once worked with a SaaS founder who bootstrapped to $30k ARR, then used a targeted angel round plus a tight 6-week seed process to hit $150k ARR. The point: measured traction + right investors beat flashy valuations without proof.
Useful resources
For legal and small-business guidance, official resources like the U.S. Small Business Administration are helpful for basics and grant info.
Next steps
If you’re early: get ready, build traction, and craft a 10-slide deck. If you’re raising seed: focus on investor fit, clear KPIs, and a clean cap table. Fundraising is a process—do the prep and the meetings get easier.
Wrap-up
Funding is a tool—use it to accelerate validated progress, not to paper over uncertainty. Pick the right source for your stage, keep terms simple, and remember: good investors help more than just with money. Ready to refine your pitch?