Early Funding Part II

We’re still discussing all the ways that you can obtain funding for your venture. In Part I, we focused on non-investment options such as bootstrapping and grants. In today’s post we’re specifically focused on investment options form angel checks to venture capital.

Family and Friends

clear terms to avoid misunderstandings. The family and friends round can be seen as controversial and exclusionary as many founders do not have access to friends or family with the extra cash necessary to make such an investment. Nonetheless, if it’s within your means to raise a Family and Friends round you should seriously consider doing so. No one will give you better terms than people that know and love you.

Who It’s For: Entrepreneurs with networks (with high net worths) willing to invest in their vision.

What to Know: Treat it like a professional transaction with written agreements.

Fun Fact: Familiar with Sweetgreen? The billion dollar salad company. Well 3 friends opened the first Sweetgreen, just 3 months after graduating college after raising $300,000 from family and friends.

Angel Investors

Angel investors are wealthy individuals who invest their personal money in startups, usually in exchange for equity (a share of your business). Many startup founders may seek angel investment before venture capital since these checks are smaller and more amenable to VERY early stage companies.

Who It’s For: Entrepreneurs with innovative ideas and high growth potential.

What to Know: Angels often provide mentorship and valuable connections, but you’ll be giving up a slice of your business.

How to Find Them: Networking events, startup pitch competitions, or online platforms like AngelList

Accelerators

Accelerators are structured programs designed to help early-stage startups grow quickly over a short, intensive period, usually 3–6 months. They provide mentorship, networking opportunities, educational workshops, and often a small amount of seed funding in exchange for equity. Remember equity means they will now own a piece of your company. Accelerators typically culminate in a “Demo Day,” where startups pitch to investors. Some of the top accelerators are Y Combinator, Techstars, and 500Global, amongst others. Note that accelerators are HIGHLY competitive, but if you can get into one it is a great signal to future investors.

Who It’s For: Entrepreneurs that are ready to scale quickly and want access to investors.

Venture Capital

Venture capital (VC) comes from funds that invest in startups with significant growth potential. They provide large sums of money in exchange for equity and often a say in how the business is run. One thing we must emphasize is that VC is not for everyone. Seriously. It seems like everyone is interested in venture capital these days and if you’re lucky enough to raise venture funding that’s freaking fantastic, but again it is NOT for everyone and that’s okay. VCs (venture capitalists) are looking for specific companies that meet certain parameters. The goal is to 10x your investment. So if they give you $10, they’re expecting $100 back and more than likely they’ll have a say in how you run your company moving forward. Now just 10% of companies that raise venture capital are able to 10x that original investment and VCs know this, but that does’t mean they’re going to lower their standards. The bottom line is do you have an idea that is easily scalable with little to no overhead?

Who It’s For: Startups in climate technology, healthcare technology, financial technology or other high-growth industries. Other industries such as CPG (consumer packaged goods) can also raise VC, but only after gaining substantial traction. It’s incredibly rare (but not unheard of) for a haircare company, for instance, to receive venture capital.

What to Know: VCs expect rapid growth and a significant return on investment. You’ll need a polished pitch and a clear growth strategy.

How to Start: Research firms that invest in your industry. This is very important. Blindly reaching out to investors that do not invest in your sector, unfortunately, won’t get you anywhere. If you have a healthtech company stick to reaching out to funds that invest in healthtech. Likewise focus on early stage funds and know where your company stands. Most early stage funds are looking for Seed-Series A, but there are funds that invest at the Pre-Seed stage, just prepare to give up a bit more equity.

Stages

1) Pre-Seed Stage - A startup in its earliest phase, focusing on refining the business idea, conducting market research, and building a prototype or minimum viable product

2) Seed Stage - A startup with a validated idea, working to build a product or service and acquire its first customers

3) Series A - A growing startup with an established business model and early traction, seeking significant funding to scale operations, expand the team, or enter new markets.