1. How to Fund your Startup: Introduction

StaStartup funding is a process by which venture capitalists, angel investors, and other private investors invest in new startups. The goal of startup funding is to create value for the investors while helping the startups achieve their objectives. Startup funding can help a business take off and grow quickly, provide the financial stability needed to continue operations during tough times, and increase the chance of success by providing early access to new innovative technology or business ideas. Any particular benefit may vary depending on the stage of a company’s development – from early-stage to post-growth – but all startup funding benefits are important for any small business looking to start up.

There are many different types of startup funding available, so there’s no one-size-fits-all answer to how to get started. However, some things to keep in mind when considering startup funding include finding an ideal partner who will help you during your fundraising journey and provide you with the right guidance, understanding what you need in order to be successful, and having a solid plan for operation (including an outline of how you will raise capital).

Through our Raise Capital program, we help startups in getting funding in the form of both equity financing and debt funding through connecting them with angel investors and VCs from our huge network of 150K angels and 30K VCs. We also help startups in getting debt funding through startup business loans and startup grants through connecting them with the right lenders and grants providers and preparing the required documents for the application. We help entrepreneurs in funding their startups at different stages, starting from idea stage to series C stage follow a rigorous process and introducing them to investors through warm introductions.

2. Steps of Funding your Startup

2.1 How to Fund your Startup and Review your Pitching Documents

You need to make sure that your pitching documents are refined before pitching them to investors. Pitches should be well-refined, clear, and concise. If your documents are not up to par, you will likely find yourself being rejected by potential investors. To make sure your pitches are perfect, you need to have refined funding documents and presentations. By doing so, you’ll make sure that your pitches are as smooth as possible and that they’re well received by potential investors.

Our team works on reviewing your pitch deck, business plan and financial model to find potential flaws in your documents and advise you on how to improve them before sending them to investors. The team will also help to ensure that your finances are clear and accurate. We provide you with valuable angels feedback on your documents and models that will help you refine your documents.

2.2 How to Fund your Startup and identify the raised amount

Many entrepreneurs come to us and they have an idea of how much money they will need in the coming two years but it’s not the right amount to start with. Knowing the exact amount of money needed is not the whole story; one need to know their current position and what they can raise.

An important factor to start with is the startup valuation. The money raised should be calculated in relation to how much the startup is worth. An entrepreneur should not give up too much money while raising capital because a startup will be raising capital for multiple rounds of funding and giving 30%-40% equity to an angel investor or a VC means that the founders will have the minority shares and ownership after several rounds of funding.

The amount of money that we recommend you to raise at each round will be studied in details in the phase of planning for raising capital.

In order to identify the raised amount, you have to understand what it is that your startup is selling. This is difficult to do without a detailed description of the product or service.

If you are selling a physical good or service, then you will need to estimate the cost of manufacturing and shipping it. You will also need to account for taxes, tariffs, and other costs associated with selling the product.

If you are selling a digital good or service, then you will need to estimate the cost of developing and maintaining the software. You will also need to account for taxes, tariffs, and other costs associated with selling the product.

2.3 How to Fund your Startup and Set the Funding Terms

Founders sometimes expect that there’s a formula for raising capital but actually there is none. Sometimes an entrepreneur raise capital per equity, in others they do so through convertible notes, in others they can get a loan or get funded through crowdfunding platforms. This can make setting fixed terms for raising the capital an inefficient process. However, we do believe that the founder needs to have a draft in mind of the investment terms that work best for their startup or at least consider the different scenarios.

We need to study the startup closely and compare the different funding sources that we have to come up with the right terms to raise capital. It could be a combination of several options! In some cases, there might be two or several funding parties, each interested in a different option, and the startup has to tune the offer so that it is fair and acceptable by both parties.

2.4 How to Fund your Startup and Identify the funding sources

There are multiple sources for funding that startups can use to get money. The funding can come from angel capital, VC funding, micro VCs, Syndicates, startup crowdfunding, and other sources of funding.

Our job during the Raise Capital program is to identify the right sources of funding after considering the amount to be raised and the terms of raising capital. Some angel investors love to come at an early stage with a ticket size of USD 100k, others prefer startups that have already an MVP finished and invest USD 200k to USD 1M. It’s a matter of preferences and matching and our job is to match you with the right source of money.

2.5 How to Fund and value your Startup

There are two main ways in which startups can approach their valuations: by using fundamental analysis or by making assumptions about future growth. There is no one-size-fits-all answer when it comes to this approach – different companies will require different levels of analysis in order to generate an accurate valuation report. There are some general principles that are often followed when doing startup valuations. These principles include identifying the startup’s potential market, estimating the current value of the startup’s assets and liabilities, estimating the future growth potential of the startup, among others.

As a startup founder, one of your top concerns is securing the funding you need to grow your business. Unfortunately, there is no one-size-fits-all answer to this question.

One common approach to valuing a startup is to use a discounted cash flow (DCF) model. This approach calculates the net present value (NPV) of a startup’s cash flows over the expected life of the company.

NPV is a key metric in determining whether or not a startup is worth investing in. However, NPV is only one piece of the puzzle. Other factors to consider include the company’s growth potential, its competitive landscape, and its financial obligations.

We help entrepreneurs in valuing their startups. We apply different methods and strategies, such as using financial models or estimated revenues that are based on past performance and looking at the number of customers, employees, or users who have already given feedback about the startup. We also compare the startup to other similar startups that have raised capital before in order to identify the right valuation.

Some of the methods we apply are: net present value (NPV) and internal rate of return (IRR). NPV takes into account all known risks associated with the startup and compares it against future payouts from investors. IRR focuses on whether the company will be able to generate enough revenue per employee overtime to cover costs along with paying out promised bonuses and dividends. We also apply different types of cash flow analyses, such as free cash flow (FCF), negative free cash flow (NFCF), and paid venture capital (PVC). Read more about our startup valuation service.

2.6 How to Fund your Startup and Match with Investors

At this stage, we set up a team who will work on matching the startup with right angels and VCs based on the startup’s stage, industry and location. We also take into account the investor’s own investment criteria. We use our AI system to match the startups with investors and we introduce startups to investors through warm introductions based on shared connections. Read more about our business angel capital and VC funding services.

2.7 How to Fund your Startup and close the Deal

Closing the deal with investors is a critical process in the startup fundraising journey. The terms of the deal will be based on how much money each party believes they can bring in from their respective investments. This process begins by discussing what each side feels is necessary for the company to succeed and create value for its shareholders.

Typically, closing the deal involves four key steps:

Negotiating terms of the investment

Signing off on the investment agreement

Getting all parties lined up on delivery dates and milestones

Finalizing and tracking financial results.

We help startups negotiate the funding terms with investors. We do this by working with our clients to identify the best funding opportunities for them and helping them to receive the best terms. We help startups in understanding the terms they need to negotiate about and how they can negotiate to make the deal is closed on the best terms for both parties. Read more about our negotiations with angel investors and negotiations with VCs services.