How to Raise Funding for a Startup: Stages & Methods

Key Takeaways

• Startup funding typically progresses through stages—starting with the pre-seed stage, then the seed stage, and advancing to Series A and beyond.
• There are several ways to fund a startup, including bootstrapping, angel investment, and venture capital, each with its own pros and cons.
• Thorough preparation, transparent financials, and strong communication skills are vital for securing funding and supporting long-term growth.

Starting a business requires more than just a great idea—it requires capital. Startup funding refers to the financial support a business needs to get off the ground and scale. This funding typically comes from various sources and is raised in stages, depending on the startup’s evolving needs.

For many new companies, raising external funding is a key step. It helps founders launch their first product, hire a team, expand into new markets, or simply keep the business running while it grows. Understanding the stages and methods of startup funding can make the process more manageable and give founders greater confidence as they move forward.

Stages of Startup Funding

Startup funding happens in stages, each designed to support a specific phase of growth. From early ideas to scaling up, every stage helps move the business one step forward.

Pre-seed

The pre-seed stage marks the very beginning of a startup’s journey. At this point, the focus is on transforming an idea into a tangible product or service.

Startups are usually run by a solo entrepreneur or a very small team working to validate a problem, explore the market, and perhaps build an initial version of the product, often referred to as a Minimum Viable Product (MVP). Some may also have early research or a waitlist of interested users.

Funding at this stage is small but important, usually ranging from $10,000 to $250,000 (€9,300 to €232,500). It often comes from personal savings, friends, family, or angel investors.

Seed stage

The seed stage is when a startup begins to grow beyond its initial concept. At this point, the MVP is often built or launched, and the startup has some early traction, such as user feedback, pilot customers, or early revenue.

The core founding team is solidifying, and the business model and market strategy are starting to take shape. Funding at this stage typically ranges from $250,000 to $2 million (€232,500 to €1.8 million), coming from angel investors, venture capital firms, or crowdfunding. This funding helps scale operations, refine the product, and establish a stronger market presence.

Series A and beyond

Series A funding is the first significant round of venture capital investment that helps a startup scale its operations. At this stage, startups usually have consistent revenue or strong user growth, a scalable business model, and a clear customer acquisition strategy.

The team is growing, with established departments like sales, product, and customer success. As the company expands, later funding rounds such as Series B, C, and D follow, allowing for further growth in size, revenue, and market presence.

Funding amounts for Series A typically range from $2 million to $15 million (€1.8 million to €13.9 million) or more, whereas Series B and beyond can vary widely depending on the startup’s industry, market position, and growth trajectory.

Types of Startup Funding Methods

There are multiple funding methods for startups, as each stage requires different resources and support. The right method depends on the startup’s needs, industry, and the level of risk investors are willing to take on.

Bootstrapping

Bootstrapping refers to using personal savings or revenue from the business to fund the startup. It's typically used in the early stages, especially pre-seed and seed, when founders want to maintain full control and ownership without relying on external investors.

• Pros:
  • Full control and ownership of the business.
  • No need to answer to external investors.
• Cons:
  • Limited funding, often not enough to scale quickly.
  • Personal financial risk.

Friends and family

This funding method involves borrowing money or receiving investment from personal connections. It’s commonly used during the pre-seed when the startup is still in the concept or MVP phase and may not yet be ready for formal investment.

• Pros:
  • Easier access to funding without formal processes.
  • No need to give up equity or control initially.
• Cons:
  • Risk of damaging personal relationships if the business fails.
  • May not provide enough capital for growth.

Angel investors

Angel investors are wealthy individuals who invest their funds in early-stage startups in exchange for equity. This method is typically used in the seed or early stages when the startup needs capital for growth but hasn’t yet proven itself.

• Pros:
  • Access to capital without the need for extensive collateral.
  • Angels often provide mentorship and connections.
• Cons:
  • Giving up equity or control.
  • May be difficult to find the right angel investors.

Venture capital (VC)

Venture capital (VC) involves investment from firms that manage pooled funds, typically in exchange for equity and influence over the company’s direction. It’s typically used in the later stages (Series A, B, C) when the startup seeks to scale and requires significant funding.

• Pros:
  • Large sums of capital for rapid growth.
  • Access to industry expertise, resources, and connections.
• Cons:
  • Loss of control due to investor influence.
  • High expectations for growth and return on investment.

Crowdfunding

Crowdfunding is the process of raising small amounts of money from a large number of people, typically through online platforms. It’s usually used in the early to mid-stages, particularly for consumer-focused products that can generate public interest.

• Pros:
  • Provides funding without giving up equity.
  • Validates the idea and builds a customer base.
• Cons:
  • Time-consuming and requires a compelling pitch.
  • No guaranteed success and potential for public failure.

Bank loans and grants

Bank loans involve borrowing money from a bank, while grants are non-repayable funds received from the government or private organizations. Bank loans and grants are typically used in the seed stage and beyond, especially for businesses with proven concepts or in industries eligible for grants.

• Pros:
  • Can provide significant capital without giving up equity.
  • Grants do not require repayment.
• Cons:
  • Loans must be repaid with interest, creating financial pressure.
  • Grants are highly competitive and may have specific restrictions.

Accelerators and incubators

Accelerators and incubators are programs that offer mentorship, resources, and sometimes funding in exchange for equity. They are typically used in early-stage startups that need mentorship, resources, and initial funding to scale and grow.

• Pros:
  • Access to mentorship, networking, and resources.
  • Opportunity to pitch to investors at the end of the program.
• Cons:
  • Giving up equity or control.
  • Highly competitive to be selected for top programs.

How to Prepare Before Raising Money

Preparation is important before raising money, as it sets the foundation for success. Poor preparation is one of the top reasons founders fail to secure funding, as investors want to see a well-thought-out plan and clear vision.

1. Find out if you need fundraising

Not every startup needs to raise external capital. Some businesses are better off bootstrapping, especially if their goals align with slower growth or maintaining full control.

To help determine whether you need fundraising, it’s important to evaluate your growth goals — are you aiming for a lifestyle business or a high-growth startup? Consider whether scaling is feasible without outside funding.

In addition, ask yourself if you can realistically grow on your own resources, and weigh the pros and cons of raising money versus staying lean. While external capital can fuel rapid growth, it often comes with the cost of control and equity, so it’s vital to make an informed decision.

2. Build a pitch deck

A pitch deck is a visual presentation used to communicate your startup's story and potential to investors. It’s essential for fundraising as it captures attention and outlines the value of your business. 

Key slides every pitch deck should include are problem, solution, market, product, business model, traction, team, financials, and ask.

Investors want to easily grasp your vision, understand the problem you're solving, and see your growth potential. Therefore, keep your deck clear, concise, and visually simple, focusing on storytelling. A strong pitch deck should be both informative and engaging, guiding investors through your startup’s journey.

3. Know your numbers

Founders must not only have their financials but also deeply understand them. That’s because investors expect a clear grasp of key metrics that reflect a startup's viability and growth potential.

Core financials include runway (how long you can operate with current funds), burn rate (how quickly you're spending), revenue (if any), customer acquisition cost (CAC), lifetime value (LTV), and gross margins. These metrics showcase your ability to manage cash flow, acquire customers efficiently, and ensure profitability.

You should also be familiar with monthly recurring revenue (MRR), churn rate (rate of customer loss), and conversion rates (from lead to paying customer). Being prepared with these figures demonstrates your financial acumen and helps you make data-driven decisions.

Investors will appreciate founders who can confidently explain their numbers, as it shows you're in control and ready for growth, rather than just relying on assumptions.

What Comes After Fundraising

After fundraising, the real work begins. Founders must use capital wisely, ensuring it’s spent on growth and development. They also need to maintain strong communication with investors and scale responsibly to achieve long-term success.

Understanding term sheets

A term sheet is a non-binding document that outlines the key terms and conditions of an investment deal between a startup and an investor. It sets the groundwork for the final agreement and helps both parties align expectations before moving forward.

Understanding the term sheet is crucial, as it affects ownership, control, and long-term outcomes. Founders should pay close attention to the valuation, which determines how much the company is worth, and the equity stake being given away.

Other important terms include liquidation preferences, board structure, and voting rights, and investor protections like anti-dilution clauses and information rights.

Post-funding responsibilities

After raising money, it’s time to shift focus from pitching to building. With funding secured, your top priorities should be operational and strategic.

Start by hiring key team members who can help move the business forward. At the same time, continue developing your product so it meets user needs and stays competitive. You’ll also need to invest in marketing or customer acquisition to grow your user base.

Most importantly, keep track of the milestones you promised to investors. These goals are not just for show. They guide your progress and help build trust with those backing your vision.

Avoiding common pitfalls

Raising money is a major win, but it’s easy to make mistakes afterward.

• One common pitfall is scaling too quickly without confirming product-market fit. If your product isn’t fully validated, pouring money into growth can backfire.
• Another mistake is over-hiring or bloating operations too fast, which drains cash and creates complexity before your business is ready

• Some founders also neglect investor relationships once the money hits their account, missing out on guidance and future support.
• It’s easy to lose sight of long-term goals while chasing short-term wins.

To avoid these issues, stay disciplined with spending, build a solid foundation before scaling, and prioritize communication with your investors. Keep your vision front and center, and don’t confuse funding with success. It’s a tool to build the business—not the end goal. Stay focused, stay lean, and grow with intention.

Laying the Groundwork for a Fundable Future

Securing startup funding is more than just part of the journey—it’s a skill. You need to understand your stage, choose the right method, build a strong pitch, and use your capital wisely. From bootstrapping to venture capital, each option has its pros and cons, and knowing your numbers is just as important as telling your story.

If you're ready to take your startup journey further, join the MS in Leadership program at César Ritz Colleges Switzerland. You’ll learn the skills and strategies needed to navigate funding, lead teams, and grow a business with confidence. It’s your next smart step toward success.

Frequently Asked Questions

How long does it take to raise a round?

It usually takes 3 to 6 months, depending on your stage, network, and how prepared you are.

Do I need a prototype to raise money?

At early stages like pre-seed, a prototype helps but isn’t always required; a clear idea and strong team can sometimes be enough.

What if I don’t want to give up equity?

You can explore non-dilutive funding options like grants, loans, or revenue-based financing.