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Launching a new tech startup requires more than just a great product - it also requires funding. When startup founders start seeking capital from angel investors or venture capital funds, it's critical for them to understand the key aspects of the startup funding process

The startup funding process involves several steps, including researching potential investors and resources, preparing a comprehensive business plan and financials, and pitching to investors.

Finding potential investors

Researching potential angel investors or venture capital investors is essential in order to find those who are well-suited for your startup company. It is important to ensure that the investor has an interest in the industry you are targeting and is willing to provide the necessary funds. Additionally, understanding the venture fund investment thesis can help you tailor your approach to improve your chances of raising funds.

Creating A Startup Business Plan

Preparing a detailed business plan and related financials will be critical for convincing investors to fund your startup company. Your business plan should include overall goals, strategies for reaching them, estimated costs, and future growth projections, along with other relevant data points needed to demonstrate the value of your venture. Financial documents such as cash flow forecasts and income statements should be prepared to demonstrate expected returns on investment (ROI).

Value Your Startup

Valuation is the process of estimating the value of a company. When investors are considering whether or not to invest in a startup, they need to know what the company is worth. Valuing a startup can be challenging, particularly for early-stage startups, since there is often limited financial data and traction.

However, there are a few methods that can help make this process easier for startup founders. Remember, there's no precise way of valuing your company. However, by using different valuation methodologies, you can get a relatively good estimation. Examples of these include:

Discounted Cash Flow: Looks at the projected cash flows of the business over time and discounts them to their present value.

Comparable Analysis: Compares the startup to similar companies in the same industry to estimate its value.

Cost-to-Duplicate: This method estimates the cost of building a similar company from scratch.

Scorecard Valuation: Assigns numerical scores to a company's various attributes, such as its size, customer base, and market position. The scores are then used to compare the business with similar companies in order to estimate its value.

Pitch To Investors

Finally, after completing all of the preparatory steps mentioned above, it's time to make your pitch to potential angel investors and venture capitalists. Your startup pitch should clearly summarize why your organization is a worthwhile investment, and you should cover important topics like your goals, product, competitors, roadmap, and financials. The goal during this step is to convince potential investors that investing in your startup is worth their time and money. After going through the due diligence process, get prepared to sign a term sheet with your investors.

Different Funding Stages

Seed funding is the first stage of funding for new early-stage companies. At this stage, startups are typically just beginning their product development or launch efforts. Seed funding can come from various sources, usually from friends and family, angel investors, or crowdfunding platforms.

Series A funding is the first round of institutional funding for a startup. At this stage, the company has probably already launched its product or service and has generated some traction and market validation.  Series A funding is used to help the company scale and grow its customer base. This is the round where venture capital investors and other types of institutional investors come in. 

Series B funding is the second round of institutional funding for a startup. At this stage, the company has demonstrated significant growth and is looking to expand its operations and explore new geographies even. Series B funding is used to help the company hire more staff, develop new products or services, and expand into new markets.

Series B funding usually comes from big venture capital funds that invest large ticket sizes; however, risk tends to be slightly lower at this stage, given that the startup has a recurrent revenue stream and market validation.

Series C funding is the third round of institutional funding for a startup. At this stage, the company has achieved significant traction in the market and is looking to expand its operations further.

Series C funding is used to help the company acquire other companies, expand internationally, and further grow its customer base. Series C funding usually comes almost exclusively from venture capital funds, corporate venture funds, and other strategic corporate investors.

Making An Exit

When investors put capital into a startup, they do so expecting a return on their investment. They only have a few ways in which they can get liquidity on their returns, and that is through:

IPO: Taking the company public through an initial public offering (IPO).

Acquisition: Selling the company to a larger company in the same industry.

Merger: Merging the startup with another company in the same industry.

Secondary offering: If an investor wants to liquidate their investment quickly, they can opt to sell their shares on the open market. 


Startup funding processes can take a long time, and they can be quite competitive. Most venture capital funds are quite demanding, and that's why they have a high rejection rate. However, by following these steps and seeking advice from experienced investors and advisors, entrepreneurs can better position themselves for success and raise their funding round.

For more information on startup companies, join aVenture to get access to our venture capital investment platform and start investing in startups.

Bruno Sanchez
Post by Bruno Sanchez
A venture capitalist with a B.S. in Economics and several years of experience in the field. With aVenture he's helping investors access venture capital.