Startup funding: A founder’s guide to raising startup capital

Startup capital can supercharge your startup’s growth, but it’s tricky to know when to start the funding process.

Raising funds is more complex than simply pitching your idea and receiving money. Each time you take money from investors, you’re giving them a piece of ownership in your company. This dilutes your personal equity and opens the door to outside feedback and opinions. Investors can also influence marketing, hiring, and product development, especially if they have a seat on your company’s board of directors.

In this guide, we’ll cover everything you need to know about startup funding.

What is startup funding?

Startup funding, or startup capital, is the money a new company raises to launch and grow, covering its initial expenses and funding operations until it can generate its own revenue. This money covers everything from building the first version of your product and hiring your initial team to renting office space and marketing. It’s the fuel that turns a great idea into a real business—an engine powered by significant capital, with startup funding in 2024 reaching nearly $314 billion.

While startup capital is necessary for growth, the source and terms of the capital you accept will directly affect your ownership and control over the company you're building. Every dollar you take from an investor comes with expectations and a stake in your company's future.

Understanding this tradeoff is the first step in making smart fundraising decisions. The capital you raise is a tool, and like any tool, how you acquire and use it will determine your success.

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What are the types of startup funding?

There are several common ways to secure funding for your startup from different types of investors, including bootstrapping, debt financing, and equity financing. The path you choose will affect your ownership and control over the company. Understanding these options is the first step toward making a strategic decision that aligns with your long-term vision. Each path has different implications for who owns and controls the company.

As Jeff Bussgang, a general partner at Flybridge, explained during Carta’s Pre-Seed Fundraising Q2 2024 webinar, there are many ways to build a great business, and the venture capital (VC) path isn't the only one. Some founders may start their journey thinking they are a venture-backed company, only to realize another path makes more sense. The key is to make the right choices for your business day in and day out.

Bootstrapping, self-funding, and friends and family

Many founders start by using their personal savings or getting money from their immediate network of friends and family. This is often called bootstrapping.

Even if the money comes from a close friend or family member, it’s important to treat these investments with professionalism. You should document every investment from day one. This avoids confusion and prevents serious legal problems down the road.

Debt and alternative financing

Other funding options include debt financing, equity crowdfunding, and small business loans and grants, such as those available through the State Small Business Credit Initiative (SSBCI) and the Small Business Administration (SBA), which has seen dramatic growth in its 7(a) Loan Program’s smallest loans for diverse entrepreneurs.

• Venture debt: Venture debt is a bank loan for companies between VC funding rounds, with less associated dilution for shareholders. This is one type of debt financing.

• Equity crowdfunding: This is the process of collecting small contributions from a large number of people, typically through online crowdfunding platforms. Some crowdfunding websites specialize in fundraising for businesses and can get the pitch out to a large group of general investors (unaccredited investors included).

• Loans and government grants: Some companies might qualify for public or private small business loans, small business grants, or other business credits with a longer period for repayment.

While some companies explore debt financing and other funding opportunities, with government programs often backing the smallest loans—those under $150,000—for high-growth companies aiming for big scale, equity financing is the most common path.

Equity financing

Equity financing is a type of startup funding where investment firms provide capital to early-stage companies that they believe have high growth potential. In exchange for this money, the investors receive equity, or an ownership stake, in the company. This is the most common path for startups that plan to scale quickly.

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What types of investors provide startup funding?

Startup capital can come from virtually anywhere, but these are some of the most common sources of financing:

• Angel investors: Angel investors are high-net-worth individuals who invest their own money into early-stage startups. They often provide valuable mentorship and industry connections in addition to capital, acting as strategic partners who can open doors for your company.

• VC firms: Venture capitalists provide capital to early-stage companies that they believe have high growth potential. In exchange for this money, the investors receive equity in the company. VCs are looking for companies that can become market leaders.

• Institutional investors: Institutional investors are typically large asset managers that pool funds from a variety of different institutional and retail investors to invest in growth-stage or pre-IPO startups, as well as other asset classes like private equity and public market investments. Examples of institutional investors include investment firms like Fidelity and T. Rowe Price. The category can sometimes extend to banks, hedge funds, and family offices.

• Accelerators and incubators: Startup accelerators and incubators are programs that provide a small amount of funding, mentorship, and resources in exchange for an equity stake in the company. These are popular paths for first-time founders seeking guidance, a structured ecosystem for growth, and a strong network of peers and potential investors. Most accelerators take a non-negotiable equity share percentage, usually 3-7%.

This video is a part of Carta’s free Startup Fundraising 101 curriculum.

The types of funding structures listed above can also have various characteristics, depending on how the money is distributed or the terms and conditions of the agreement. Rounds may take shape in the following ways:

• Down round: A down round is when a company raises a VC financing round and the pre-money valuation of the company is lower than the post-money valuation of the previous round, resulting in a lower price per share. When a company raises a round with a higher valuation than the previous round, it’s called an up round.

• Tranched financing: A type of financing in which investors release funds in parts as your company hits certain milestones instead of providing one lump sum.

• Bridge round: A bridge round is extra money a company raises between priced rounds that helps founders extend their last round of fundraising.

How do you find the right investors?

Funding your startup is about finding the right investors to be long-term partners, not just taking money from anyone. The best investors bring capital as well as industry expertise, a valuable network, and guidance to help you grow. Your goal is to find someone who believes in your vision and has the experience to help you achieve it. In Q2 2025, startups on Carta raised $26 billion, down 4% year over year and a staggering 54% below 2021’s peak: Overall deal activity as flagging as it is, finding that right-fit partner is more critical than ever.

You should look for investors with experience in your industry, like B2B SaaS or healthcare, and a track record of helping companies at your stage. Even with substantial dry powder available to investors, market uncertainty means you need to find partners who truly align with your vision. The most effective way to meet them is through warm introductions from trusted contacts in your network. This could be other founders, VCs, startup advisors, or your existing investors.

You can also build your network by attending industry events and participating in founder communities, such as those found within startup accelerators. You don't need to be in a major tech hub to build a strong network and find the right partners for your startup.

A walkthrough of the startup funding rounds

Now that we’ve covered the basics, we’re ready to examine the rounds of startup fundraising. Each round of funding has a different purpose and process with its own goals, investor expectations, and impact on your company’s ownership structure. Understanding this journey helps you plan for what's ahead.

Pre-seed and seed funding: Getting your company started

If you’ve identified a market opportunity, just started building a minimum viable product (MVP), or have a prototype of your product, then your company is likely in the pre-seed or seed stage.

Pre-seed and seed funding is often used to develop your good idea. Investors are essentially making a bet on the founder and the market before any product-market fit (or even a true product) is established. That means the very early investors in your company are taking on a lot of risk.

By this point, you likely have a product you can demo, but you might still need to create a user-ready MVP and conduct beta testing before you’re ready to fully launch your product in the market. This stage of startup funding can be used for a variety of a startup’s needs, including product development or expanding the team.

This video is a part of Carta’s free Startup Fundraising 101 curriculum.

Using convertible securities for early-stage startup funding

In contrast to a priced round, an investor in a pre-seed or seed round will typically provide cash in exchange for convertible securities, which are specific legal instruments designed for speed and simplicity in startup fundraising. Convertible notes and SAFEs are the two most common types of convertible instruments.

• Simple Agreement for Future Equity (SAFE): A SAFE is a contract that gives an investor the right to purchase stock in a future equity round. It's not debt and doesn't accrue interest, though founders should understand the difference between pre-money vs. post-money SAFEs as it has become the standard fundraising mechanism for very early-stage companies.

• Convertible note: A convertible note is a form of short-term debt that converts into equity in a future financing round. Unlike a SAFE, it typically has an interest rate and a maturity date.

For a startup's very first fundraise, convertible instruments like SAFEs and convertible notes are the standard. At the pre-seed stage, these two instruments account for virtually all deals; in the first quarter of 2025, SAFEs comprised a record-high 90% of all pre-seed rounds on Carta, with convertible notes making up the other 10%.

As companies mature to a seed round, priced equity becomes a third common option, though SAFEs remain the most popular choice. Data from late 2023 through Q3 2024 shows that 64% of all seed rounds were SAFEs, while 27% were priced equity and just 10% were convertible notes.

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For Amber Allen, founder and CEO of Double A Labs, using a flexible instrument was key. "Raising capital with SAFEs through Carta was a breeze," she says, noting that it allowed her to secure funding in under six weeks.

Series A funding: Building on early traction

A Series A funding round is a startup's first major institutional funding round. Around the time you’re ready to raise the Series A round, you’ll be focused on getting your product into the market, demonstrating product-market fit, acquiring customers, and generating revenue. Companies at this stage have usually developed a substantial user base and proven that they are primed for success on a larger scale with recognition and business traction in the market.

A Series A is often a priced round (where your company gets an official valuation). Early investments like SAFEs convert into equity during this round, a process that can be complex and requires careful attention to detail.

As a founder, you can expect to raise anywhere between $1 million to upward of $10 million with a Series A. According to our data, the median round size for Series A companies was $7.9 million in Q1 2025.

What sets a Series A round apart?

Institutional investors are more likely to come in during this round because they can see metrics related to revenue growth, customer acquisition cost, and lifetime value. Investors at this stage look for clear evidence of product-market fit and a solid plan for scaling.

Instead of investing capital in exchange for convertible debt or SAFEs, most investors in the Series A round want immediate ownership equity in preferred stock, with all related rights and preferences. To determine how much equity they’ll get, you’ll have to negotiate a formal valuation of your company. You’ll also have to navigate negotiating term sheets with your attorney’s help; these outline the terms of the investment and serve as the basis of the definitive legal agreements.

Series B funding: Scaling the business

The Series B funding round is all about aggressive growth. By this stage, your company has a proven business model, a significant user or customer base, plenty of traction, and a proven record of revenue growth. Investors usually come in during these later rounds to help with business development, such as executing a strategic hiring plan to scale the team, expanding into new markets, and building a strong market presence.

Investors expect to see predictable revenue and a management team capable of leading a much larger organization. Your company is now a fast-growing business with significant momentum.

Series C, Series D, and beyond: Expanding your market

Series C funding and subsequent funding rounds help expand your market reach and grow your company internally. At this stage, new growth-stage investors may sign on. These institutional investors, which can include private equity firms, typically invest larger amounts of money in more-mature companies that are a better bet to go public or be acquired for a significant amount, which make them a lower risk for investors.

These later stages are for companies that are already successful and well-established. This capital is often used to prepare for an initial public offering (IPO), acquire other companies, or expand globally.

By this point, your company’s ownership structure is very complex, with multiple classes of stock and many different investors. Investors, auditors, and your board expect institutional-grade equity management.

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How much funding does your startup need?

The right amount of funding is specific to your business's needs and goals. Before you can approach investors, you need a clear picture of how much money you need and exactly how you plan to spend it. To figure out how much you need, you can start by calculating your costs, which generally fall into two main categories.

• One-time startup costs: These are the initial, non-recurring expenses required to launch the business. Think of these as the foundational investments you need to make to get your doors open. Examples include legal fees for incorporation, business registration, purchasing necessary equipment, and initial product development costs.

• Ongoing operational expenses: These are the recurring costs to keep the business running month after month. This category includes predictable expenses like employee salaries, office rent or co-working space fees, software subscriptions, and marketing budgets.

You should calculate a target amount based on your projected monthly expenses, or burn rate, for a period of at least 12 to 18 months, plus a buffer for unexpected costs. This amount should be tied to specific, fundable milestones, such as launching a product or reaching a user goal. This approach shows investors that you have a disciplined and strategic plan for the capital.

This isn't a guess, but a calculated plan for what you'll accomplish, whether that's building your product, hiring your first engineer, or acquiring your first customers. Having a thoughtful answer shows investors you've done your homework and are a responsible steward of their potential investment.

But figuring out how much money to raise can be a complex process. Raise too much money, and you risk over-diluting your ownership stake in your own company and making it difficult to raise another round at a higher valuation; raise too little, and you risk having too few resources to achieve the milestones you need to successfully raise your next round.

While a 12- to 18-month runway is often a common target, the time between funding rounds has lengthened considerably. The median startup that raised a Series A in Q4 2024 had waited 774 days (about 2.1 years) since its previous round. Given this trend, it's now more prudent to plan for a runway of at least 24 to 30 months. This plan helps you justify the amount you're asking for when an investor asks, "What will you do with my money?" It demonstrates that you're thinking strategically about how to use capital to grow the business.

As Heather Hartnett, CEO and founding partner of Human Ventures, explains during Carta’s Mastering Fundraising Strategy webinar, "You should be really realistic about how much money you need to get you to the next milestone and then probably double that." She notes that creating a new market category, for example, often takes a lot more capital than you might initially predict.

Understanding dilution

Deciding how much to raise involves a fundamental tradeoff. Raising money means giving away ownership of your company—a concept called share dilution. The impact of this dilution on a founding team’s equity is significant and compounds with each funding round. For example, after a seed round, the median founding team collectively owns 56.2% of their startup. According to a recent founder ownership report, that figure falls to 36.1% after a Series A round and to just 23% after a Series B. Dilution is also affected by factors like using pre-money vs. post-money SAFEs.

Instead of being surprised by dilution, you can plan for it.

Carta’s Scenario Modeling software removes the guesswork from this decision. It allows you to see exactly how different investment amounts and valuations would affect your ownership stake, empowering you to make better decisions before you even start talking to investors.

How should you think about valuation?

Your company’s valuation is an assessment of your company’s worth, and also a direct byproduct of two factors: the amount of money you raise and the amount of equity you’ve given up to investors. According to Carta data from Q1 2025, median dilution at seed was 18.8% across all sectors, and 17.9% at Series A, down from 20.9% a year earlier.

In the early stages, private company valuations are negotiated prices based on factors like your traction, team, market size, and investor demand.

It’s also important to understand the difference between a fundraising valuation and a 409A valuation.

• Fundraising valuation: The value placed on your company during a funding round, negotiated between you and your investors

• 409A valuation: An independent appraisal of your private company’s stock price, which is required by the IRS to set the strike price for stock options

Remember: Valuations are fluid. A founder may go into the fundraising process with an ideal valuation in mind, but they may need to be flexible. When negotiating your ideal valuation, your goal should be to raise enough money to reach your next phase of growth, satisfy investors, and maintain a reasonable ownership percentage.

Carta is the leading provider of audit-ready 409A valuations, helping you stay compliant and offer competitive equity to your team.

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How to prepare for your fundraise

Getting ready to raise money can feel overwhelming, especially when experts agree that founders are facing a brutal environment. These foundational steps create the roadmap that will guide you through your conversations with investors and help you avoid common pitfalls.

Chat with fellow founders

Consider reaching out to other founders and mentors who’ve had success reaching their milestones on time and securing capital. Ask them what they learned from their raise and what they would do differently if they could. Specifically, ask how they defined their milestones, how much cash they needed to reach their next round, and whether their fundraising target was on point.

Ask your attorney for advice

Your startup attorney may have guidance on what you need to do logistically to prepare for fundraising. You might need to firm up your idea from a legal or regulatory standpoint, cross-reference your product or service with competitors, or apply for patents.

Gather data and crunch the numbers

It’s critical that you have the right metrics to back up your company’s growth and profit potential. You need to be able to show investors why it’s beneficial to bet on your company and why you will be a good steward of their money by being able to explain your spending costs, estimated runway, and funding needs.

When should you raise money?

The best time to raise is from a position of strength, not desperation, which means having a clear plan for how the new capital will help you reach your next major milestone. The goal is to secure enough runway, or time to operate, to grow your business before you need to raise again. Fundraising is also a continuous process of building relationships.

You should be able to tell a story about how this investment will get you from point A to point B. The amount you raise, especially for an initial pre-seed funding round, should be directly tied to what you need to achieve specific, fundable milestones over the next 12 to 18 months.

Waiting until you’re low on cash puts you in a reactive position, which can lead to unfavorable terms, especially when experts note that venture funding is more scarce. Instead, think about fundraising when you have a clear story to tell about your progress and a compelling roadmap for the future. This proactive approach demonstrates foresight and builds investor confidence.

This video is a part of Carta’s free Startup Fundraising 101 curriculum.

Reasons to wait to fundraise

• You need to generate more interest from your end user or customer. The type of product you build—and the people you build it for—can dictate when funds are available to you. For example, some investors don’t want to invest in a consumer-focused product unless there’s already a long waiting list of interested customers, while that target number of customers demonstrating traction may be lower for companies in enterprise or B2B.

• You have enough resources to continue bootstrapping for a while. Think about the resources at your disposal, including working capital, talent, and tools. If you have enough capital from crowdfunding or friends and family to continue bootstrapping your company, you may want to delay fundraising for a while. But if you don’t have enough money to hire the right talent or continue to build out your new products, it may be time to consider raising money from outside investors.

• You don’t have the time or bandwidth to invest in pitching. Pitching investors on your idea takes a lot of work. You have to create a pitch deck, contact the right investors, schedule meetings, and carve out space for conversations and follow-ups. If your focus is still on building out your prototype, you may want to hold off on pitching until you have more of a foundation.

Reasons to start fundraising

• You already have a lot of traction with your end users or customers. If you’re still working on your prototype but already have a lot of clear demand for your product or service, you may want to run with it and start reaching out to investors.

• You’re going to run out of cash and resources in six months. Fundraising doesn’t happen overnight. It can take three to six months of regular pitching and conversations with investors before you get any money. To avoid falling behind or missing opportunities to get in front of customers, you may want to start looking for funding before you need it.

• You need more support. Fundraising doesn’t just give you capital. It can also provide you with valuable investor support and mentorship. If you’re at a point in your company’s growth where you need guidance from experienced investors to gain momentum, fundraising could be smart.

What documents do you need?

Before you start pitching investors, you need to have your key documents in order. Being prepared shows that you're serious and organized. For Geertjan Van Bochove, co-founder of iPiD, having a professional setup was key to building trust: "It helped us clearly show that there’s a source of truth to our investors.”

Here is a simple checklist of what you'll need:

• A compelling pitch deck that tells your company's story

• A one-page executive summary that highlights the key points of your business

• A simple financial model showing your projections, with headcount planning being a critical component

• A clean, accurate, and investor-ready cap table

Showing up with a professional cap table from Carta signals to investors that you are credible and ready for business. It demonstrates that you've been thoughtful about your company's ownership from the very beginning. Investors expect to see a cap table managed on a platform like Carta Launch, not a spreadsheet, because it builds trust and speeds up due diligence.

For Diana King, founder of Day Trippers, getting her company on Carta Launch was a game-changer. "Once I started working with Carta’s Launch platform, I could easily see how the fundraising could all come together," she says.

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Developing your business plan and pitch deck

A pitch deck is a short presentation that tells the story of your business. It’s your main tool for communicating your vision to potential funders for your startup. A strong pitch deck clearly and concisely answers an investor's most pressing questions about your company and its potential.

Your deck should include a few key slides that walk investors through your company's story. Think of it as a visual narrative that covers the most important aspects of your business.

• The problem: What specific pain point are you solving for customers? A clear problem shows there's a real need for what you're building.

• Your product: How does your product or service fix that problem? This is where you explain what your company does in simple terms.

• The market: How many people have this problem and would pay for your product? Investors want to see key startup metrics and KPIs that show you're targeting a large and growing market.

• Your team: Why are you and your co-founders the right people to build this? Highlight your founding team's relevant experience and passion for the problem you're solving.

• Traction: What have you accomplished so far? This could include building a waitlist, generating early revenue, or making significant product progress. For outlier companies, this can be massive; for example, OpenAI's traction helped it raise an impressive $11.3 billion.

What are investors looking for?

Investors evaluate your idea, you as a founder, and the overall professionalism of your operation. They are looking for signals that you have the discipline and foresight to build a successful company.

While startup metrics are important, investors are ultimately betting on three things: the team, the market, and the idea. Different types of investors want to see a compelling combination of all three.

• A great founding team: Investors want to see founders with deep expertise in their industry and a clear passion for the problem they're solving.

• A large market: The potential market for your product needs to be big enough to support a high-growth, venture-scale business.

• A unique insight: Your company must have a compelling approach to solving a problem that is different from and better than existing alternatives.

As Hartnett explains, investors want to see that you deeply understand the customer's needs. "If you're a founder, you should know that problem inside and out and what customer is going to want to use it... It's really understanding the need that you're solving is important and selling an investor that I've done my research. I know that this is needed. Now, I just need the money to go build it."

The pitch and due diligence

The process usually begins with an initial pitch meeting where you present your deck and tell your company's story. If the investors are interested, they will begin due diligence, which is the process where they check to make sure everything you've told them is accurate. This is where your preparation pays off.

This is where having your company information organized is a huge advantage. For King, getting organized on a platform made a tangible difference. After moving her company's documents to Carta, her first investor "came back with double the original investment in a pre-seed funding round." A professional setup makes investors feel secure and streamlines the entire process. With many VCs expecting exits to increase, they are actively looking for well-prepared companies to back.

The term sheet

If due diligence goes well, an investor will present you with a term sheet. A term sheet is a document that outlines the main terms of the investment, including the valuation, investment amount, and what rights the investor will have. It's a key document that sets the stage for your partnership.

This document is the blueprint for the final legal contracts, but it is typically non-binding. It’s always a good idea to review the term sheet with a startup lawyer to make sure you understand all the terms and their implications for your company. This is a negotiation, and you should feel empowered to ask questions and discuss the terms.

Once you receive a term sheet, remember that you're looking for a long-term partner, not just the highest possible valuation. The right investor can bring much more than just money to the table, including valuable advice and connections.

Closing the round

After an investor says yes, the work isn't over. Closing is the final step where you and your investors sign all legal documents and the investor wires the money to your company's bank account. This stage can be a slow, administrative headache, involving coordination between you, your lawyers, and your new investors. Staying organized is key to a smooth closing.

Platforms that are built for deal closings can bring everyone together to get all the documents signed and the round closed efficiently. This transparency and speed helps you get back to what matters most: building your business.

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Common fundraising mistakes to avoid

The fundraising journey is a learning process for every founder. Being aware of common pitfalls can help you avoid unforced errors and set your company up for success.

• Not understanding dilution: Giving away too much ownership too early can limit your control and future fundraising ability. It's easy to over-optimize for dilution, but the focus should always be on building a great business. As Jeff Becker of Antler explained during a recent Carta webinar, "a big piece of something that is worth zero is zero."

• Accepting misaligned capital: Taking money from investors who don't share your vision can lead to conflict, as seen with Color Labs, which raised an extraordinary amount of $41 million pre-product, only to shut down with $25 million still unspent.

• Maintaining a messy cap table: An inaccurate cap table can lead to costly legal fees and can delay or even kill a funding round. In a tough market where company shutdowns are accelerating there is no margin for the kinds of unforced errors that a messy cap table can create during due diligence.

For these reasons, many experienced founders prioritize professional equity management from day one, often using equity management software to do so. For example, when Mito Health's lead investor suggested using spreadsheets, CEO and co-founder Kenneth Lou insisted on a more scalable approach. As he explains, "I’ve already gone through the startup process once before, and I know what problems will come if we don’t manage our cap table properly. All of these are administrative problems which take away more time to solve than needed without a tool like Carta."

Manage your capital and ownership with Carta

Raising capital for your startup is a milestone, not the finish line. You use that capital to hire a team, which involves issuing stock options and managing a growing list of stakeholders. This introduces new complexities like tracking vesting schedules and complying with tax and legal requirements.

An equity management platform can help you navigate these challenges at every stage of your journey, providing a single source of truth for your company's ownership.

Your partner from first check to IPO

For most successful startups, fundraising is a recurring part of the company's life. The systems you set up for your first round will become the foundation that supports you as you grow, hire, and raise future rounds like a Series A funding or Series B funding round.

A single platform that scales with you can be a powerful asset, especially as the path to a public exit becomes more viable. You can use tools for SAFE financings to manage your first checks, keep your cap table clean as you hire your team and manage their equity compensation, and later use features like waterfall modeling and liquidity products to help with IPO readiness as you prepare for an exit.

Carta is the end-to-end platform that simplifies this entire journey. We provide the tools and confidence founders need to manage ownership from their first SAFE financing to a future exit.

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Frequently asked questions about startup funding

Here are answers to some common questions founders have about getting funding.

How can I fund a startup with no money?

You can start by bootstrapping, which means using revenue from your first customers to fund growth, or by seeking non-dilutive funding like grants from government programs such as the State Small Business Credit Initiative (SSBCI) or foundations.

How long does it take to get funding?

The fundraising process, from the first investor meeting to having money in the bank, typically takes three to six months, so it's important to start the process before you run out of cash.

What is the difference between debt and equity financing?

Equity financing is when you sell a piece of your company's ownership to investors in exchange for capital. Debt financing is when you borrow money that you have to pay back over time with interest, without giving up any ownership.

How long does it take to raise a funding round?

While it’s common to hear that raising a funding round takes several months, recent data shows the timeline can be much longer, requiring founders to plan for a more extended runway. For example, companies that raised a Series B in the second quarter of 2024 waited a record median length of 856 days (nearly 2.5 years) after their Series A.

How does fundraising affect my ownership percentage?

Every time you raise money by selling equity, your ownership stake is diluted, meaning you own a smaller percentage of a larger company. Carta’s Scenario Modeling software helps you see this impact clearly before you sign a term sheet, so you can understand the trade-offs.

What is the difference between pre-money and post-money valuation?

A company's pre-money valuation is its value before an investment, and the post-money valuation is its value after the investment is added.

Can I raise money from friends and family?

Yes, this is a common way for early-stage companies to get started. In fact, a 2024 report on the seed funding market notes that many pre-seed startups seek their initial capital from friends and family, alongside angels, and early-stage venture investors.

What is a valuation cap and how does it work?

A valuation cap sets the maximum price that an early investor's money will convert into shares. This rewards them for their early risk by giving them a better price than investors in a later round.

Do I need a lead investor for a SAFE round?

No, you can typically raise money on SAFEs from multiple investors on a rolling basis without a formal lead investor. This flexibility is one of the main advantages of using SAFEs.

What is a good amount of startup capital?

The right amount of capital is the amount needed to reach your next set of business milestones, which will enable you to raise future funding at a higher valuation.

What is the difference between seed capital and startup capital?

Startup capital is a broad term for all the funding a company raises, while seed funding refers specifically to the first round of money used to validate the business idea.

Is 1% equity in a startup a good offer?

The value of an equity compensation offer is determined by the company's valuation, not just the percentage. It's better to consider the potential future dollar value of the shares.

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