How to get the funds to create a start up

Without startup funds, the vast majority of startups would die. The amount of money needed to bring a startup to profitability is usually well beyond the funding capabilities of the founders and their friends and family. A startup means a company that is built to grow fast. High-growth companies almost always need to burn capital to sustain their growth before they reach profitability. Some start-ups successfully self-finance so-called self-financing, but they are the exception.

Why Raise Funds?

Money not only allows startups to live and grow, but it is almost always a competitive advantage for: hiring key personnel, public relations, marketing and sales; therefore, most startups will want to get it. The good news is that there are many investors hoping to give startups the right money even though the process of raising that money is often long, arduous, and complex. However, it is a path that almost all companies and founders must take, but when is the right time to raise money?

When to raise funds?

Investors decide to issue funds when the idea they feel is convincing, when they are convinced that the founding team can realize their vision, and that the described opportunity is profitable enough.
For some founders it is enough to have a history and a reputation, but for most of them it will take an idea, a product and a certain amount of adoption from customers.
But investors also need to be persuaded. Usually a product that they can see, use or touch will not be enough but it needs to be appreciated by the market and is undertaking a real growth.

Therefore, founders should raise money when they understand what the market opportunity is and who the customer is, and when they have delivered a product that matches their needs and is being adopted at an interesting and rapid pace.

How many funds to issue?

Ideally, you should raise all the money needed to achieve profitability, so that you never have to raise it again. If this can be done, not only will it be easier to raise funds in the future, but it will also be possible to survive without new funding. That said, some types of startups will need an additional stage of development. Their goal should be to raise all the funds needed to reach their next “fundable” milestone, which will usually be between 12 and 18 months later.

In choosing how much to collect, several variables are negotiated, including the progress that amount of money will buy, credibility with investors and dilution. If you manage to give up less than 10% of your company in your seed round, that will be wonderful, but most rounds will require up to 20% dilution and you should try to avoid more than 25%. In any case, the amount you ask for must be tied to a credible plan that is able to convince investors that their money will have a chance to grow.

Company evaluation

It is so simple to evaluate a company. Therefore, it is best to let the market set the price and find an investor to set the price or the maximum to be reached. The greater the investor interest generated by your company, the greater the development of your value.

However, in some circumstances it can be difficult to find an investor who says what the company is worth. In this case, one could opt for an evaluation by looking at the companies that carry out the same business. The goal is to find an evaluation which reflects the real value of the company.

Investors: Angels and Venture Capitalists

There are different categories of investors, at the base we can find angels and venture capitalists. The difference between angels and venture capitalists is that the former are amateurs while the latter are professionals. Venture capitalists invest each other’s money while angels invest theirs on their terms. Even though some angels are quite strict and behave a lot like professionals, their decision making is usually much faster because they can make decisions on their own.
Venture capitalists usually take more time, more meetings, and have more partners involved in the final decision. And remember, venture capitalists see multiple offers and invest in very few, so it’s important to be able to stand out from the rest.


There are a growing number of new vehicles to raise funds, such as AngelList, Kickstarter, and Wefunder. These crowdfunding sites can be used to launch a product, conduct a pre-sale campaign, or find venture funding. In exceptional cases, the founders have used these sites as a dominant source of fundraising or as clear evidence of demand. They are usually used to fill work shifts that are largely complete or, sometimes, to revive a shift that is having a hard time taking off. The ecosystem around investing is changing rapidly, but when and how to use these new sources of funds will usually be determined by the success of fundraising through more traditional means.

Meeting with investors

If you meet an investor, keep in mind that the goal is not to close, but to get the next meeting. Investors will rarely choose to commit on the first day they hear the presentation, no matter how bright it is. So it will be necessary to organize more meetings. Keep in mind that the hardest part is getting the first money in the company. In other words, meet as many investors as possible, but focus on those who are most likely to close. Always optimize to get the money as soon as possible.

There are some simple rules to follow when preparing to meet investors. First, you need to know your audience so you might research what they like to invest in and try to understand why. Second, it’s helpful to make it as simple as possible by focusing on why it’s a great product, why you are the right team to build it, and why together you should create the next giant company. Then you listen carefully to what the investor has to say. If you can get the investor talking more than you, the odds of a deal skyrocket.

Investors are looking for compelling founders who have a credible dream and as much evidence as possible to document the reality of that dream. To do this, you need to find a style that works and tells the story of the company, then demonstrate that you work as hard as possible. Pitching is difficult and often unnatural for founders, especially technical founders who feel more comfortable in front of a screen than in front of a crowd. But everyone will get better with practice, and there is no substitute for an extraordinary amount of practice.
During the meeting, it is important to try to find a balance between trust and humility. One must never be arrogant or overbearing. You must be open to intelligent counterpoints, but stand up for what you believe and, even if you fail to convince the investor, he will have made a good impression and you will probably have another chance.


When entering into a negotiation with venture capitalists or angels, they will certainly be more experienced than those requesting funds, so it is almost always better not to try to negotiate in real time. Requests can be studied by asking for help from partners, consultants or legal counsel. But remember to ask venture capitalists or angels what they want and why they do it. However, it is important to remember that the evaluation you will have in this first round will rarely matter to the success or failure of the company. The aim of all this is to be able to obtain the investment that is needed.
Once the investor has decided to invest, it shouldn’t take more than a few minutes to exchange the signed documents online and make a wire transfer or send a check.

Fundraising is a necessary, and sometimes painful, task that most startups have to undertake periodically. A founder’s goal should always be to raise funds as quickly as possible. Often this will seem like an almost impossible task and when completed, it will feel like you have climbed a very steep mountain. But if you look to the future it is clear that it was just a small obstacle to overcome on the real climb that must be faced for the success of the company.

by Abdullah Sam
I’m a teacher, researcher and writer. I write about study subjects to improve the learning of college and university students. I write top Quality study notes Mostly, Tech, Games, Education, And Solutions/Tips and Tricks. I am a person who helps students to acquire knowledge, competence or virtue.

Leave a Comment