The ultimate step by step guide for raising money for your business. With case studies.
- Patrick Frank
- Mar 16
- 12 min read
Updated: Mar 21
- How to calculate funding needs: Map out cash flow, growth challenges, and safety margins.
- Investor readiness: Build a solid business plan, financial models, and an engaging pitch deck.
- Funding options: Explore self-funding, angel investors, venture capital, crowdfunding, and SBA loans.
- Presentation tips: Structure your pitch for maximum impact and avoid common mistakes.
- Legal basics: Understand investment agreements like SAFEs, convertible notes, and equity deals.
Quick Comparison of Funding Options
This guide also includes case studies like how Notion raised $18M in Series A funding and how UVMask crowdfunded $5.5M. Follow these steps to secure funding and grow your business. Let's dive in!
Determining Your Funding Requirements
Calculate Your Funding Needs
Getting your funding calculations right can make or break your business. Harvard Business School Professor Shikhar Ghosh explains, "Many startups determine their funding needs by estimating the point at which revenue will arrive, then making plans based on that predicted revenue. But revenue often takes longer to arrive".
Here’s how to approach it:
- Map Your Cash Flow Needs: Prepare a cash flow projection that includes startup costs, monthly operations, and major investments. Cover at least one year, but planning for five years provides better insight into the future.
- Account for Safety Margins: Add buffers to handle delayed revenue or unexpected expenses.
- Factor in Growth Challenges: Growth can put pressure on cash flow. Without a positive cash flow, you risk losing control.
"You raise money to buy time. You buy time to run experiments. You run experiments to reduce uncertainty. You reduce uncertainty to get more money." - Professor William A. Sahlman, Harvard Business School
Once you’ve calculated your funding needs, you can identify the best funding options to meet your business objectives.
Match Funding Types to Business Goals
The type of funding you choose should align with your business stage and goals. Here’s a quick breakdown:
When deciding, keep in mind factors like working capital needs, marketing and sales budgets, operational costs, and plans for market expansion.
"Many founders say, 'I want to get 2 million dollars and I want to give up 40%.' They assume they can get to the next round, but they haven't done the calculations or seen the implications." - Shikhar Ghosh, Professor of Business Administration at HBS
With 78% of startup funding coming from personal savings and $671 billion invested by venture capitalists globally in 2021, it’s crucial to choose funding sources that not only match your business stage but also allow you to maintain control over operations.
How to Raise Startup Funding: EVERYTHING You Need to Know
Getting Your Business Ready for Investors
Once you’ve nailed down your funding needs, it’s time to position your business to stand out to potential investors.
Write Your Business Plan and Financial Models
Did you know that businesses with formal plans grow 30% faster than those without one? A solid business plan not only shows you’ve done your homework but also helps investors see the potential in your company.
Here’s what your business plan should cover:
Keep in mind: customer acquisition costs have jumped 60% in the last five years. Make sure your financial models address this with detailed strategies and costs.
"Investors want to feel confident they'll see a return on their investment. Your business plan is the tool you'll use to convince people that working with you - or investing in your company - is a smart choice."
A well-thought-out business plan sets the stage for an impactful pitch deck.
Build Your Investor Pitch Deck
Investors typically spend just 2–5 minutes reviewing a pitch deck. That means your deck needs to be concise, visually engaging, and packed with the right details.
Here’s how to structure it:
- Opening ImpactStart strong with your company mission. As Karin Klein of Bloomberg Beta says, "The best decks provide a narrative".
- Market OpportunityHighlight the problem you’re solving and the size of your market. Use visuals - investors remember 95% of visual data compared to just 10% of text.
- Financial ProjectionsSimplify complex spreadsheets into graphs that clearly show your growth potential. Industry benchmarks can help back up your numbers.
"At Bloomberg Beta, we believe a product demo is more useful than slides. One is a description of a thing; the other is the thing itself." - Karin Klein, Founding Partner at Bloomberg Beta
A compelling pitch deck is just one piece of the puzzle. A strong leadership team can seal the deal.
Strengthen Your Leadership Team
Investors look for a leadership team that blends experience with fresh ideas. A strong team shows you have the depth and capability to execute your vision.
Here’s how to build one:
- Pair experienced executives with younger, innovative professionals to balance credibility and creativity.
- Clearly define roles and responsibilities to align with your business goals.
- Develop a succession plan to prove your company’s long-term stability.
"A robust leadership team is the backbone of any successful organization. It serves as the guiding force that shapes the culture, drives strategic initiatives, and influences the overall performance of the company." - Funds for Companies
If you have gaps in expertise, consider hiring part-time executives or advisors. This approach can boost your credibility without overloading your budget. Show that your team has the skills and vision to deliver results for investors.
Funding Sources and Options
Once you've determined your funding needs, the next step is identifying the right sources to fuel your business. Picking the right option depends on where you are in your journey and what your business requires.
Self-Funding and Family Investment
Bootstrapping remains one of the most common ways to start a business, with nearly 65% of entrepreneurs relying on personal or family savings. While it allows you to maintain full control, it also requires careful money management.
Here are some common self-funding options:
"The more of your equity that you can retain and control, the more the upside…Just remember raising money, whether it's from me, on 'Shark Tank' [or] anywhere, that's an obligation. There's somebody who wants that money back." - Mark Cuban
Working with Angels and VCs
Angel investors typically invest between $10,000 and $50,000, while venture capital firms provide larger sums across different funding stages. Here's a breakdown of typical funding amounts and valuations:
In 2021, global VC investments reached $671 billion. However, VCs often require a substantial equity stake and a say in your business decisions. If you're looking for alternatives, other funding methods might be a better fit.
Alternative Funding Methods
Today's entrepreneurs aren't limited to traditional investors. There are several alternative ways to secure funding:
For instance, an auto repair shop funded its growth by combining 40% self-funding, 20% investment firm capital, 10% crowdfunding, and 30% SBA-backed loans.
"There's no 'fun' in funding." - Wil Schroter, Founder and CEO of Startups.com
Each funding option comes with its own requirements and timelines. For example, professional investors may take months to finalize deals, while bank loans can close in weeks if you meet the criteria. Make sure your choice aligns with your business's immediate goals and timeline.
How to Present to Investors
Investors spend just 2 minutes and 20 seconds reviewing pre-seed pitch decks. That means your pitch needs to grab attention fast. Data and clarity are your best tools for making an impact.
Build a Strong Pitch
A well-structured pitch delivers value quickly and effectively. To stand out, focus on a clear, data-driven approach. Here's a breakdown of what top investors look for in a presentation:
"I want a deck that right off the bat, on the first slide, tells me what this company is about. That starts with a good impression. From then on, I know what I am looking for. I know the context."
- Ariel Poler, Entrepreneur and Angel Investor
Once your narrative is solid, adapt your pitch to match the preferences of different investors.
Adjust Your Pitch by Investor Type
Tailoring your presentation to your audience can make all the difference. Each type of investor has unique priorities, so adjust your focus accordingly:
For example, angel investors appreciate a compelling personal story and a clear market opportunity, while VCs want hard numbers and evidence of scalability. Crowdfunding audiences respond well to visuals and community-driven messaging.
Common Pitch Mistakes to Avoid
Only 1% of investor presentations secure funding. To improve your odds, steer clear of these common errors:
Keep your presentation to 20 minutes, leaving time for questions. Be ready to answer tough inquiries with concise, well-informed responses. Highlight essential metrics like revenue growth, gross margins, and cash flow.
Successful Funding Examples
These examples highlight how well-thought-out funding strategies can lead to measurable business growth.
Tech Company Series A Success
Notion's 2019 Series A funding round is a prime example of how preparation and timing can deliver powerful results. The company raised $18 million from top investors like Index Ventures, Draft Ventures, and Felicis Ventures. Within just a year, Notion's valuation skyrocketed to $800 million, driven by a strong product-market fit, steady revenue growth, and a clear expansion strategy.
Online Store Crowdfunding Win
In 2020, UVMask demonstrated how consumer product campaigns can thrive with strategic execution. Their crowdfunding campaign on Kickstarter and Indiegogo raised an impressive $5.5 million by combining effective marketing with smart product strategies.
Small Business Angel Investment
Angel investment success often depends on being well-prepared and having the right connections. A strong product is just the start - investor readiness, solid documentation, and a reliable team are equally important.
Finding the right angel investors also means aligning with individuals who share the company’s vision and can provide valuable expertise. Jeffrey Eschbach, Clinical Assistant Professor of Strategy at the Kellogg School, highlights this dynamic:
"There's a saying in the funding world, 'If you want money, ask for feedback. If you want feedback, ask for money.'"
Take BionicGym as an example. By focusing on strategic marketing and selecting target countries carefully, they raised over $900,000 on Indiegogo and achieved up to a 9× return on investment.
These examples emphasize the importance of preparation, precise timing, and a clear game plan in achieving funding success.
Legal and Financial Requirements
Once you've polished your pitch and built your team, it's time to tackle the legal and financial aspects of your business. These steps are essential for securing funding and staying compliant.
Investment Terms and Agreements
Knowing how to structure investment agreements is key to raising funds effectively. One commonly used tool is Y Combinator's Simple Agreement for Future Equity (SAFE), introduced in 2013. It's widely adopted for early-stage fundraising and simplifies the process of securing investments. Here's a quick comparison of common agreement types:
Each option has its own pros and cons, so understanding the long-term impact on equity and control is critical.
Legal Requirements and Reports
Adhering to securities laws and regulations is essential, and the requirements depend on your investors and any exemptions you use. Proper documentation not only ensures compliance but also builds trust with stakeholders. Below is a breakdown of key documents and their purposes:
"Legal documents build trust with stakeholders, such as investors, customers and partners. They demonstrate the company's commitment to legality and professionalism, which can enhance its reputation and attract more business and investment opportunities."– Stripe
Working with Professional Advisors
Legal and financial advisors play a critical role in guiding you through the fundraising process. When selecting advisors, consider the following:
- Industry Experience: Look for professionals with expertise in your specific sector.
- Regulatory Knowledge: Ensure they are up-to-date on securities laws and compliance requirements.
- Network Access: Choose advisors with strong connections to potential investors.
Transparency is crucial during negotiations. Focus on clear communication and aligning priorities with your investors. As James Gilmer, Compliance Specialist at Harbor Compliance, puts it:
"Collectively, your board serves to ensure that programs are funded for lasting success. Board members also share the fiduciary responsibility to maintain compliance with all applicable laws and regulations in the course of delivering those programs."– James Gilmer, Harbor Compliance
Keep your legal documents updated to reflect changes in your business and regulatory environment.
Managing Your Business After Funding
Once you've secured funding and delivered your pitch, the next step is focusing on running your business effectively and maintaining strong relationships with your investors.
Smart Money Management
Carefully plan and monitor your finances to make the most of your funding. Create a detailed burn rate budget and track your weekly expenses and funding runway.
For instance, Zoom achieved a $0 net burn by perfectly aligning its cash burn with its gross profit.
Investor Communication Best Practices
Keeping your investors informed with regular, clear updates is key to building trust.
- What to Share:
- Key financial metrics
- Major business developments
- Ownership changes
- Progress toward milestones
- How to Share:
- Quarterly financial statements
- Virtual investor meetings
- Live Q&A sessions
- Exclusive networking events
Consistent communication not only reassures your investors but also lays the groundwork for future funding opportunities.
Prepare for Next Funding Round
Strong financial records and a clear strategy will help you secure your next round of funding. In Q1 2023, the average seed round was $3.6 million, while Series A rounds averaged $18.7 million.
"To prepare for future funding rounds, controlling your burn rate is crucial. Balance growth and expenses wisely, ensuring funds last until the next milestone. Monitor spending against revenue and prioritize investments for maximum impact." – Tushar Rayate, Founder & CEO @ NextgenDigiHub
"As a founder, you should expect your investors to add value. They shouldn't be making your life more difficult by getting too involved, but they should be available for counsel and for whatever doors they can open for the company." – Erik Stettler, Chief Economist of Toptal
Conclusion: Action Steps
Key Funding Steps Summary
Start by identifying exactly what you need funding for - whether it's launching your business, day-to-day operations, research, or scaling up. Compare your funding needs with current market trends to ensure you're in line with industry norms. These foundational steps will help you draw insights from successful examples.
Learn from Case Studies
Take lessons from real-world examples of businesses that navigated funding challenges effectively. For instance, Matchaful shifted to e-commerce after facing initial setbacks, leading to a 40% year-over-year growth in their direct-to-consumer model.
Similarly, Spendless Shoes focused on thorough market research, data-backed decisions, clear customer segmentation, and a measured growth plan.
"As a Founder who has so many things going on, having Clearco for easy and uncomplicated access to funding has been the greatest gift" – Hannah Habes, Founder & Chief Matcha Officer, Matchaful
Getting Started Checklist
Here’s a quick checklist to help you kick off your funding journey:
- Define Your Funding Purpose
- Pinpoint exactly how much funding you need and where it will go.
- Create realistic financial forecasts.
- Get Your Documentation Ready
- Write a business plan with strong market analysis.
- Organize critical financial documents.
- Prepare an executive summary and an engaging pitch deck.
- Research and Build Connections
- Explore funding options like venture capital, angel investors, or crowdfunding.
- Network with industry professionals.
- Find investors whose goals align with your vision.
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