Are you wondering how to raise startup capital?

Whether you’ve just had your “eureka!” moment and have seized on a great business idea you need to fund and you are working on your business plan, or you’ve already been putting in the 100 hour weeks and know you need an injection of some kind to make the next leap, how do you go about raising capital for your startup?

Do you know what you need to raise money at your stage in business? Have you explored all of the potential options? Do you have the right pitch and timeline? Are you pointing your business in the right direction?

Here’s what you need to know…

Bootstrapping Vs. Fundraising & When To Make The Switch

As I explain in detail in The Art of Startup Fundraising, many successful startups start out bootstrapping. Sooner or later, if you really want to scale and give your mission the best chance of its maximum impact you are probably going to raise capital. 

You may need to do this out of the gate if your upfront cash needs are truly great just to make this idea work. Others raise in advance to bring in great advisors and backers, or to create buzz, credibility and hit the ground running fast. 

Starting out bootstrapping can still have its perks. Just don’t sacrifice the impact you were really inspired by out of being stubborn and wanting to do it all yourself. 

Several good reasons to start out bootstrapping include:

  • Preserving equity for later rounds, when you can raise more capital for fewer shares
  • Being in a stronger financial and negotiating position when you do go out to raise
  • Proving the business model so any money put in gets a better return
  • Staying focused on the mission and business versus the distraction of fundraising
  • Preserving the ability to make the best decisions for your customers and team

Startup Capital Sources

When most people think about startup funding, they think about venture capital. In reality, this is just a small part of the market, startup ecosystem and investor pool.

You may raise money via the following sources:

  • Business partners and cofounders
  • Friends and family
  • Angel investors
  • Angel groups
  • Venture capital
  • Strategic corporate investors
  • Startup accelerators and incubators
  • Startup competitions
  • Grants
  • Business loans and lines of credit
  • Crowdfunding platforms
  • Direct marketing to individuals that are qualified, accredited investors

What Stage Are You At?

The stage of business you are in will dictate the right type of investors to pursue or let in, as well as what you’ll need in order to close on the money. It will also dictate which investors will be best for getting you to the next stage. 

  • Pre-Seed Rounds: It’s all riding on you and your team, and the idea
  • Seed Round: It’s about you, the strength of your team, and the proof of concept you’ve achieved
  • Series A Round: It’s about demonstrating your abilities and achievements, and getting the money to perfect it
  • Series B: You’re raising money to scale on a proven product and business model
  • Series C & Beyond: You are consolidating the space, building more value in your company, and making last-mile sprints before heading for the exit

How Long Does It Take To Raise Startup Capital?

How long it takes to land investors and actually close the round can vary significantly by stage. A lot rides on how much you are rising and who from.

In the early stages, there isn’t much for investors to check out. It’s all about you and the idea. The checks are far smaller.

Of course, with no track record, the hard and time-consuming part is going to be crafting the pitch and finding the right investors. When you do, banking the money can be fast. Still, this may be the result of months and years of building relationships with these people. 

As you progress through later funding rounds you are dealing with more sophisticated investors who can have whole teams to do their dealmaking. The checks are bigger. So is their risk.

They are often pooling money from others they are legally responsible too. They have to do a lot of due diligence. This can take months to a year. 

The Steps in Raising Startup Capital

  1. Research, research, research, know the capital market
  2. Decide on which method of fundraising you are going to pursue
  3. Make a shortlist of your ideal target investors
  4. Know the most important metrics you’ll focus on and present
  5. Get help telling the right story about your startup
  6. Craft the right pitch deck and presentation for these investors
  7. Start networking like crazy and build relationships
  8. Get pro help from a fundraising advisor

Heading For The Exit

Once you starting accepting capital from investors in exchange for the equity you are really committing to pursuing an exit. Your shareholders may not all agree on the decisions to take to get you there, which offer or route you should take, and the price and terms.

Yet, you are heading for an IPO or get acquired. It’s never too early to start strategizing your exit and learning everything you can to ensure a great one. If you don’t you could barely walk away with a penny, or be stuck working for someone else in a cubicle for years.

Once you’ve tasted entrepreneurship, this probably isn’t going to be something you can stomach very well anymore. 

Summary 

Know when to raise startup capital, your options for doing it, the steps to a successful round, and get out in front of the exit to make sure it ends well too.

Remember that storytelling plays a key role in fundraising. This is being able to capture the essence of the business in 15 to 20 slides. For a winning deck, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.

Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.

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