How to raise capital for your startup

Jason Atkins
Co-founder & President
March 17, 2023

Whether you’ve just been brought on as a new CFO or you’re the founder and CEO of your own startup, sourcing capital is sure to be a major element of your role.

Which makes total sense, when you think of all the benefits an injection of funding and partnership can have for young businesses: fuel to scale into new markets ahead of competitors, cash to ramp up teams and operations, strategic guidance, and beyond.

Many an early-stage company gets off the ground through a combination of personal funds, loans, angel investing, and often a whole host of other creative solutions.

But if you're still striving to get to that point — then this right here is the guide for you.

Come with us as we guide you through all the steps that will help you get started raising money for the first time, or refresh your memory for your next round, including:

  • What you need to know to choose your best funding source
  • How and why to calculate your company’s financial needs
  • Which legal documents to get prepared
  • How to create efficiencies with a cutting-edge equity management platform
  • Where exactly to hit the ground running to raise capital

It’s time.

Grab that cup of coffee (we won’t judge if it’s your fourth of the day) and zone in because we’re about to take you on a crash course through everything you need to know to get started with your first capital raise.

1. Explore your options

This is more of a strategic step than a tactical one, but we had to include it before starting down the path to helping you raise capital. We want to make sure you understand exactly what raising capital entails — and if it’s truly the best path for you.

So let’s go ahead and quickly cover the three most common options when it comes to generating funds for an early-stage biz.


A company is bootstrapped when it’s fully sustained by the founder’s own funds as well as the revenue it generates. A bootstrapped business doesn’t actually raise capital, which means that it doesn’t have any loans to pay back and that no shares (aka equity) are ever doled out.

On the upside, with this strategy the founder remains the sole owner of the business, meaning all decisions can be made unanimously and they don’t have to worry about paying dividends and all the other tasks that come with exchanging equity for cash.

But on the downside, bootstrapped startups often aren’t able to scale as quickly as the funding isn’t flowing as freely. This of course works for tons of businesses, you just have to consider if it’s right for yours considering your place in the market and how competitive you need to be.

Convertible note

A convertible note (also called a convertible bond or a convertible debt) is a loan (aka debt) that can be converted into equity.

When first issued by an investor, a convertible note is your typical loan with interest. However, the agreement is usually that the loan will convert into shares of stock once the company hits a certain goal. Since convertible notes are most common among early-stage organizations, that goal is often the closing of a Series A round of funding (more on this concept soon). If all goes according to plan, the company doesn’t have to pay back the loan or the interest, and the investor ends up with equity in the company.

This has become a popular way to generate funds because it doesn’t require that a young business have an extremely accurate valuation. The agreement doesn’t take valuation into account at all, it only stipulates that the company pay the funding back in some way — whether that’s in equity or in cash.

With a convertible note, investor risk is minimized as they’re sure to get their money back in some form. For startups, it provides the capability to extend runway, scale hiring efforts, and position themselves for further fundraising.

Capital raise

Now, introducing the fundraising method you’ve all been waiting for: the capital raise! (cue crowd cheering)

The term “capital raise” really just defines the process of a company approaching another company, a private investor, or a financial institution to ask for capital (aka money, cash, or cashola if you’re fancy).

Capital is most often provided in two main forms:

  • Debt capital entails debt that must be repaid, typically with interest. Debt capital often comes from financial institutions, and can look like a business loan, a business line of credit, a business credit card, and so on.
  • Equity capital is the more common form of capital raised by startups. This fundraising method gives the investor — often an angel investor or venture capitalist — equity in your business in exchange for a cash infusion.

Raising capital from investors has become the standard for funding in the startup world because it’s easy for everyone to understand, it’s fast to implement, and it can be personalized to fit any set of terms for both the investor and company.

Bonus: Getting to know investor lingo

If your capital raising journey is going to have you conversing with investors on the regular, it’s important you get to know some of the language they’re going to be throwing around.

Here are some key terms you’ll see a lot when it comes to the different rounds of funding startups often go through:

Seed funding is typically the first “official” funding stage when a company gets money from an outside source (pre-seed sometimes comes before this phase). Seed funding can come from a variety of places: friends and family, business accelerator programs, angel investors, venture capitalists, and more — all sources that we’ll describe in more depth later. At this point, companies are usually valued around $6 million and close $1 million in seed funding, on average. This money is usually put toward research and development around the product and/or service as well as paying salaries for founding team members.

Series A funding is typically for companies that are fully operational and have a record of success, which makes them desirable to more established angel investors and venture capital firms. Usually when a company is ready to approach investors for their Series A round of funding, they’ve been valued around $24 million. An average of $10 million is raised in this stage, and is often used to improve upon existing products/services and scale into new markets.

Series B funding is all about growth. The types of investors that participate here are similar to those from Series A, but in this phase the companies seeking funding are well established and are looking for a capital injection that will grow their teams and their user bases so they can welcome a new level of success. Companies here are valued around $40 million and generate an average of $26 million in capital.

Series C funding is when the really big financial institutions — think hedge funds, private equity firms, etc. — like to get involved. This is because companies that are raising capital in this stage are established, successful, poised to go global through product development or acquisition, and could possibly become publicly traded. Companies at this phase are typically valued near $70 million and raise around $50 million to fuel their expansion. This is usually where the rounds of dishing out equity in exchange for funding ends, though you may see a few companies exploring Series D and even E rounds.

If you need more help choosing which fundraising method is best for you, read our article Bootstrapping vs. Capital Raise – What Suits Your Company Best?

2. Calculate your financial needs

Does the traditional capital raise route still feel like the right move for your business?

If so, then let’s dive right into what comes next in the process — determining how much to ask for.

This is a really important step for a few key reasons.

The first is more internal: it forces you to really scrutinize your operating costs so that you can create accurate projections for future capital requirements. That makes this a great time to trim the fat and get organized when it comes to expenses. If you really want to win over investors, you need to be able to show them you’re running a tight ship that’s sure to generate returns on their capital.

The next reason you should stop and focus here before moving forward is that crafting your ask requires a lot of consideration.

Raise too little and you’ll be back to knocking on doors in no time, wearing out your welcome as well as diverting your attention away from what you should really be focusing on — running a growing business.

But if you set out to raise what feels like too much to investors, you may have a hard time getting them to listen and spend much longer than necessary locking down capital. Sometimes unfortunately, everyone knows everyone in the startup world. Word of a drawn-out raise cycle may spread, and that can make your business seem less savvy and desirable to other investors — so you want to avoid this at all costs.

Every single business will have a unique inventory of expenses, but when you set out to calculate your costs, this list should help you get started and make sure no stone is unturned:

  • Salaries and hiring costs
  • Outsourcing (contractors, research, etc.)
  • Technology building and/or acquisition
  • Subscriptions to SaaS programs
  • Cloud storage
  • Marketing
  • Legal retainers, fees, etc.
  • Office space rent, utilities, parking, etc.
  • Any licenses and permits

3. Get your docs all prepped

And just like that, you’re halfway there.

Hope you enjoyed that quick lil’ pep talk, because this step is doozy — especially if you don’t have any tools with smart automations that can give you a leg up (more on that in the next section!).

Of course you need to prepare your pitch, and build your investor lists and relationships. But just as important is getting your docs and cap table ready to go. After all, this is the key aspect of the deal.

In this phase, it’s time to zoom in on all the various documents that go into creating a smooth raise.

While this step is about keeping everything peaceful and above board, it’s also about showing your capabilities and improving confidence with potential investors — and hopefully the outcome of your fundraising efforts.

There is so. much. paperwork. involved in pulling off a successful capital/equity deal, but we’ll just talk about some of the most important basics most entrepreneurs will need to think about.

Shareholder List

If you already have shareholders (such as through an ESS or ESOP), you need to make sure you’re tracking their information somewhere. A shareholder list documents all the people who actively own shares in a company. Typically it includes their basic contact info, their number of shares, and their price paid. It’s important that this information stays up to date as this document outlines the ownership of a company and is used for investor communication, to dispense dividend payouts, and more.

Terms Sheet

A terms sheet is a document that basically summarizes the details of a business investment. It’s not typically legally binding, it just offers an easy way for all parties to ensure they’re in agreement about the deal. Not every investor will require one, but you should be aware of them as they can be especially helpful when pushing to close capital with an investor who is short on time.

Shareholders’ Agreement

This document is valuable anytime you have more than one shareholder. What it does is define the relationship between the company and shareholders, addressing things like which decisions require shareholder approval, how shares can be transferred, etc. Often the details of the terms sheet will be rolled into this document and, once it’s signed, the contents become legally binding.

Cap Table

If you don’t already have a cap table in place, now is definitely the best time to tackle it.

A cap table (short for capitalization table) is a living document that outlines all things capital at your company.

Your cap table will provide a comprehensive record of equity. It should get into the nitty gritty when it comes to stockholders as well as option holders, warrant holders, and anyone else with any ownership rights. This document should lay out payment details, vesting schedules, liquidation rights, and any other pertinent details for every equity transaction.

A current cap table is critical to making smart decisions when it comes to issuing equity, and is also pivotal in determining the market value of a company.

It’s key that your cap table as well as all the other documentation we mentioned stays organized, up to date, and in-bounds when it comes to current laws and regulations.

If it sounds like a lot to handle manually, that’s because it is.

Even with just a few investors, when everyone is investing using different structure types and signing in various capacities, it can easily take hours of back-and-forth emails just to get your core documents completed — and that’s fast.

Imagine the drag if anyone requests document revisions, or wants to have another discussion that may change the terms. It’s enough to add another full-time-job worth of work and stress on top of your already overflowing plate.

Say, doesn’t a little help sound nice right about now?

Yeah, we thought so. So much so that we’ve spent years building out a global equity management platform that can help you automate key equity raising and management processes.

Read on for details.

4. Use an equity management platform

Keep up with your raise, keep up with managing your company, and keep your sanity intact with  an equity management platform.

Equity management platforms apply technology to the many steps that swirl around issuing and managing equity.

Cake is the most modern and easy-to-use equity management software, because we have one singular focus: to make equity simple to acquire and simple to use for global founders.

A big part of how we do that is through the thoughtful capital raise workflow we’ve built to help founders develop effective equity management right from the start.

It all begins with our templates for some of the most complex legal documentation, so you can forget about manual data entry and human error slowing down your offers. When your documents are complete, use our automated process to get them digitally sent, signed, and securely stored. Of course, you can rely on Cake’s in-app communications to hammer out any last minute details during this process.

Once all the documentation is finalized, our financial integrations make it easy for investors to complete transactions right inside the Cake platform. Then, share certificates are issued straight through our app — and your integrated cap table is automatically updated, as well.

That’s right, you can finally wave goodbye to that frustrating spreadsheet and hello to your new single source of ownership truth with Cake’s cloud-based cap table.

Unsecure, complex spreadsheets only make it more difficult to track equity, and thus the overall value of your company. Cake’s cap table management system finally makes all your equity information digestible. And what’s more, it integrates with every other feature inside Cake, so it remains up to date whether you’re raising funds or managing an employee option plan.

But hopping back over to our equity-raising features, you can track the progress of each and every raise in real-time with our beautiful company dashboard. And you can even enable stockholders to monitor and manage their shares as well when you invite them to use Cake.

If you find you need help along the way, Cake support is standing by. And your team will even enjoy access to our global roster of experts who are ready to provide advice around legal issues, compliance, tax regulations, and more.

We believe it should be a piece of cake for startup business owners to raise capital, manage equity, and focus fully on what they’re good at — growing their businesses.

In the era of global digital capital and innovation, it’s time for a global digital platform that streamlines equity transactions. Cake is the only software that prioritizes global ease of use when it comes to executing raises.

What could more effective equity raising and managing mean for your business? With Cake, you can use your equity to attract great investors and employees that help you grow further, faster.

Ready to get started fast, quick, and in a hurry?

We’d be stoked to have you on board!

All you have to do is pick your plan and get started raising that first round of capital for your startup in ten minutes or less.

5. Go and start raising capital

At this point you should have your best fundraising path chosen, your financial projections clearly laid out, and all your important documentation prepared — with the help of your equity management platform, of course.

Now, it’s time to do the dang thing.

Allow us to walk you through the most popular vehicles for raising capital so you can get off to the races.

Bank-backed biz loans

Bank-provided business loans aren’t a typical route for startups, but we did want to mention them in case they seem like a good option for you.

A bank loan is a type of debt that requires repayment in full, often with the addition of interest. With banks, there isn’t an option to exchange equity for funding. And because banks aren’t as comfortable with risk as individual investors are, their loans — especially for startups without a long financial history — often come with a lot of regulations, high interest rates, and other things that make them less desirable for most early-stage businesses.

Our best piece of advice if you do pursue a business loan from a bank is to shop around at different institutions to choose one that understands your business and can offer competitive rates.

Business accelerator programs

Business accelerator programs enable early-stage startups access to mentorship, education, a support network of other founders, investor contacts, and other resources.

Immersive programs like this can take place over a few months and their goal is to, you guessed it, rapidly accelerate growth for companies that are just starting out.

Accelerators offer the chance to get connected with investors, but some even fund startups out of their own coffers. In exchange for their services and outright funding in some cases, many accelerators take payment in the form of equity. Some charge a fee, similar to tuition. More rarely, accelerators are free or at least affordable thanks to corporate sponsorships and/or government grants.

“Graduating” from a recognized accelerator — Y Combinator and Techstars come to mind — can lend a startup an air of legitimacy, helping create a ton of awesome fundraising and investment opportunities.

Friends and family

Asking for funds from friends, family, and close connections is a common step for many (very) early-stage startups.

This is a highly flexible fundraising method for beginner founders. Some “lenders” won’t expect repayment, while others might but with quite favorable terms — such as no interest. In many cases you won’t even need a valuation for your company, because thanks to your personal connection most of your investors here are simply supporting you, no matter your business metrics.

While this is certainly one of the more approachable fundraising options, that doesn’t mean you shouldn’t take it seriously. Use it as practice for when you get to the big leagues. Strive to create realistic projections of capital needs and be careful that you aren’t diluting equity early on, as this may be an important bargaining chip as you target bigger investors down the road. Issue share certificates, create term sheets and repayment plans for each investor, and keep your shareholder list up to date.

We believe effective equity management should start as early as possible. If you choose to raise capital from friends and family, don’t hesitate to bring equity management software on board to avoid any sticky legal or personal situations later on.


It seems like crowdfunding as a source of capital has really taken off in recent years.

Crowdfunding is the process of pitching your business to a large audience (the “crowd” in crowdfunding) in hopes that those who are interested in what you’re producing will contribute funds.

Notice how we said “contribute” instead of “lend” or “invest”? That’s because crowdfunders are not your typical investors or lenders. When crowdfunding, your audience is the end user, the consumer. You secure funding by pitching them on how your offering will impact their life in a positive way — not by educating them on your business model, earnings projections, and how you’ll help their bank account grow (like you would a traditional investor).

What crowdfund contributors get in return are perks like discounts, early access, or even input into how your service or product is crafted. Often, no equity changes hands and no repayment is expected — but these particulars depend on the platform you use to raise capital.

This is why, when it comes to crowdfunding, it’s less about valuation and more about having a strong pitch around what you’re building and what it has to offer your target market.

Where does one make this kind of pitch? Today, tools like Indiegogo, Kickstarter, and SeedInvest help new businesses reach the masses.

Crowdfunding is a clever way to not only raise capital but to test market fit, and even start building a loyal following before you have a usable product or service on the market. But it’s important to remember that it can take more time than fundraising strategies that target lump sum payments, as you may need hundreds if not thousands of individual contributions to meet your capital goal.

Angel investors

An angel investor is generally defined as a high-net-worth individual who provides capital for early-state businesses. Most often you’ll see these private investors get involved in the seed round, which is usually the first “official” round of funding a company raises to hire, improve their product or service, and otherwise get moving.

Since angel investors are getting involved at a time when the future of the company is quite uncertain, they’re usually rewarded with relatively high percentages of equity. And in addition, many angel investors don’t just offer startup capital — they come with their own experience and expertise as well as a whole roster of contacts whom they can call on to help as you grow your business. Because of this, angel investors are often seen as partners in a way other investor types and funding sources are not.

Other service providers whom you already work with — lawyers, accountants, etc. — are a great place to start when you’re looking for a personal recommendation on an angel investor. Accelerators also usually provide these types of contacts. And, there are online platforms like AngelList and plenty of alternatives that may help you get started.

Close more investors with our guide to 7 Things Investors Look For in a Startup.

Venture capitalists

Venture capitalists (VCs) are also people who invest in growing companies, but instead of their own capital they’re investing money provided by large companies, investment firms, groups of investors, and other similar sources.

Since VCs are working with a huge pool of cash, they’re typically looking to invest large amounts in companies that don’t seem super risky, so that returns are all but guaranteed. So many VCs are looking for businesses with a track record of growth, revenue, and the ability to generate investment returns. Their goal is less to provide mentorship and more to provide rocket fuel that boosts your business’ growth — and their returns.

Of course, there are venture capital firms out there who are willing to take on more risk. But they’re still looking for startups that have carefully considered every part of their approach, from growth and spending projections to their business plan, launch schedule, and how they handle equity (that automated, digital cap table is sounding better and better!). These VCs will do plenty of due diligence to ensure taking on equity in a more early-stage, and therefore more risky, startup will be worth their outpouring of cash.

Connecting with a VC is a longer process that requires much research and consideration. Usually, the best way to reach a VC is to get involved with the network that surrounds them and generate a warm introduction, to be exercised when the time is right. We like the walkthrough this guide provides to get started.

Raise startup capital in record time with Cake

At Cake, our team is inspired by (and in awe of!) founders who are building innovative companies with passionate teams and aligned investors.

Our mission is to help these business builders get the equity they need to make it all possible.

Sound like you?

Treat yourself to Cake today.

You can take a test run with no credit card required — or you can get right to the good stuff by signing up for our affordable growth plan.

Start now and in just ten minutes or less, you’ll be on your way to creating an equity management strategy that keeps your business growing, all while keeping you sane.

Looking for more? Check out our blog for more insightful startup hacks, tips, and tricks.

This blog is designed and intended to provide general information in summary form on general topics. The material may not apply to all jurisdictions. The contents do not constitute legal, financial or tax advice. The contents is not intended to be a substitute for such advice and should not be relied upon as such. If you would like to chat with a lawyer, please get in touch and we can introduce you to one of our very friendly legal partners.

Jason Atkins
Co-founder & President

Co-founder of Cake Equity, husband, father of two, dog owner, surfer, thought leader, likes to talk about anything equity, capital raising, climate, startups, making the most of life, and ageing backwards.

Achievements and qualifications:

  • Bachelor of Commerce in Accounting and Finance
  • Certified Practising Accountant (CPA)
  • Board Member of FinTech QLD
  • Mentor at Startmate, River City Labs, Stone & Chalk
  • AirTree Explorer

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