Fundraising: What to Expect in the Journey? Stages of Startup Funding

Fundraising is not an easy walk in the park, it will be challenging. It always takes longer than you think and has more ups and downs than you’d expect. Go into the process with an attitude that “you’ll be successful”. You need to commit to this process, even though it can be unpredictable and messy.

This article is an introduction to the series “Startup fundraising 101” - a resource that has been created in order to help all founders in their fundraising journey; whether you are just starting to think about fundraising or are in the middle of it. In the next articles, we will cover topics such as:

- Why raise money, when to raise money, and how much to raise?

- Valuation and financing options

- Types of investors when raising money 

- From pre-seed to seed fundraising process

- 100 questions investors will ask you

- Common mistakes when raising money 

- Best practices for fundraising/pitching online

- And more

Fundraising: what to expect in the journey?

The right timing to raise the seed round varies per company, so there is no fixed time. Some startups are able to raise money quicker than others, but even for strong startups, fundraising is a marathon that requires near-constant attention for a minimum of 8–12 weeks, given the current economic climate it may take even longer so best to start sooner rather than later. You may also have to review the amount you need to fundraise for your next round and try to raise more. In any case, the process is more grueling than you might imagine, and you need to prepare for it as seriously as you would for a race.

Prepare for rejection and get accustomed to it. A lot of it. A promising startup gets 17 or 18 “no’s” for every “yes.” Rejections are completely normal. Unless you had 20 rejections, it means you haven’t tried enough yet. These brush-offs often have less to do with the startup in question than a peculiar context or concerns for each investor (Angel or VC). Still, it stings. But do not get demoralized, even as the stress level will escalate every week as inevitable “passes” pile up. Many deals are closed sub-optimally simply because founders are ground down by the process, slightly panicked, and want to be done with it. If you keep hearing the same feedback over and over again, you should take it into consideration and act on it before pitching to more people. 

And finally, remember that getting a “no” is better than a “maybe”. In that way, you can focus your energy on something more productive and promising. Moreover, if you’re lucky, a “no” will come with feedback. 

Fundraising: where are you on the journey?


Pre-Seed Funding = Idea Stage

At the beginning of the journey, you’re still in the idea stage, and you find yourself in a “Valley of Death”. To start off, in this phase, we usually talk about getting money from FFF: family, friends, and fools. This period of startup funding can be challenging due to the fact that the business model has not yet been proven. Hence, the money from the pre-seed funding helps to design the product, launch an MVP, get early customers, and some level of product and market validation.

Seed Funding = Company Stage 

In the seed funding stage, we look at angel investors rather than people we know, and these angels invest their own money. Another source would be early-stage venture capitalists (VCs). What you do in the seed round is taking little money, to prove your traction in one area. Once you’ve nailed your promise, start looking for more money in order to prove your next steps. In the seed funding round the money helps to bring products to market, sign first contracts, and advertise to the public.

Series A = Product & User Base Optimization

In Series A funding aim higher, it’s time to raise more funds. At this stage, you reach out to angel investors as well but the focus shifts mainly to VCs. Unlike angel investors, VCs take other people’s money and then invest in young, risky companies. Finding the right VC for your startup is very important. Apart from capital, they can help you get to the next stage and open up their network to you so it is important to take this into consideration as well. In the process, it is easy to forget about the values fit between you and the VCs - it should not only be them evaluating you -  but you should assess them as well and ensure that they are the right VC for you to bring on board and have similar values. Money raised during Series A usually helps to scale the product, reaching product-market-fit, and introducing new features.

Series B, Series C, and further = Growth Capital and Preparing IPO / Exit

If everything goes well, Series A is not the last stage of startup funding. In the Series B round, you most probably raise money that helps hire new team members as well as funding further expansion. As your company grows, in Series C you aim much higher and raise money that usually helps to acquire competitors and pursue further expansion. Some companies don’t stop at the Series C and go further. However, after you successfully completed as many funding rounds as you need, it’s time to think about thee exit. Here you have to choose between selling to one of the market giants, offer the company on the stock market, which is called an IPO (Initial Public Offering) or continuing to build it. The IPO is just another capital raise, however, this time the investor is neither the angel nor VC. It’s the public. When you “go public”, people can buy and sell the shares among themselves.  


Also read: Fundraising in time of crisis: More advice for startup founders from Antler's Jussi Salovaara


Here at Antler, we strive to create a strong community of experts that founders can rely on for advice and mentoring as they begin to build their startup. Want to learn more about how we support our startup founders? Read more about it here.

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