Raise funding

Why this step matters

Outside money can buy time, hires and speed, but it is not required for every startup and it is never free. Equity investors own part of your company and expect a large outcome; grants and revenue cost no equity but come with their own conditions. Raising well means picking the right kind of money, raising enough to reach a clear milestone and signing terms you understand.

How to do it

1. Decide if and why you need money. Write what you would do with it and the milestone it should reach in 18 to 24 months (for example, a revenue level or product release that makes the next round possible). If revenue can fund the plan, bootstrapping keeps full ownership.
2. Start with non-dilutive money. Government innovation grants, research programmes and competitions give money without equity. In the US, federal research grants for small businesses are a major source; the UK, the EU and India have their own innovation agencies and schemes. See /best/grants for current programmes and their rules.
3. Learn the early-stage instruments. Most pre-seed rounds in the US use a SAFE (simple agreement for future equity), created by Y Combinator. YC's documents describe it as not debt: it carries no interest or maturity date, and converts into shares when you raise a priced round. The valuation cap is the highest valuation at which the SAFE converts; with YC's post-money SAFE, the investor's ownership is the investment divided by the post-money cap, so $500,000 on a $10 million cap is 5%. Some SAFEs add a discount, or use an MFN clause that takes the best terms you later give others. See the glossary for SAFE and valuation cap. In the UK, angels often invest via SEIS/EIS-eligible shares or advance subscription agreements; check the rules with an adviser.
4. Build the materials. A 10 to 12 slide deck (problem, solution, traction, market, business model, team, the raise and its use), a one-paragraph summary for intro emails, a simple financial model and a data room with company documents and the cap table.
5. Make a targeted investor list. Find angels, pre-seed funds and investor programmes that invest at your stage, in your sector and region; /best/investor-programs lists programmes that back early founders. Aim for warm introductions from founders they backed.
6. Run a tight process. Book first meetings within two or three weeks, so interest builds together. Keep a tracker of every conversation, next step and amount.
7. Negotiate and close. Compare the cap, discount, pro rata rights and any side letters. Model the dilution of every SAFE together, have a startup lawyer review the documents, collect signatures and wires, and update your cap table.
8. Keep investors informed. Send a short monthly update with metrics, wins, problems and specific asks.

What it costs and how long it takes

Using standard SAFE templates keeps legal costs low; priced rounds cost more in lawyer time. A focused pre-seed or seed process typically takes one to three months of active work, longer when the market is slow. Grants have their own calendars and can take months from application to money.

Free credits, perks and services that help

Accelerators combine investment with perks and investor access; see /accelerators. Grants are in /best/grants and investor programmes in /best/investor-programs. Cap table and legal services are in /best/legal.

A simple dilution check

Before signing, add up what you are giving away. If you raise $250,000 on a $5 million post-money cap and later $500,000 on a $10 million post-money cap, those investors together own about 10% when the SAFEs convert (5% plus 5%), before the priced round and any option pool are added. Do this sum every time you consider a new SAFE, and keep a simple cap table showing founders, option pool, each SAFE and an expected next round. Founders who track this calmly negotiate better, because they know exactly what a lower cap or a bigger cheque really costs.

Common mistakes

• Raising too early. Without users or a working product, most investors will pass; build evidence first.
• Stacking SAFEs blindly. Several post-money SAFEs add up to more dilution than many founders expect.
• Paying finders. Reputable investors do not require a fee to look at your company, and success-fee brokers can create legal problems.
• Raising too little. Aim for enough runway to reach a real milestone with time to spare.
• Ignoring grants. Non-dilutive money is the cheapest capital you will ever raise.

Go deeper

IdeaChecker scores your idea on market, competition, timing and economics, which helps you sharpen the case investors will test: ideachecker.net.