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Things to look out for while raising funds for your business

Securing an investment from an angel fund or a VC business can be a vicious cycle. Investors love businesses that make money, and these are exactly the kind of startups that are not desperate for cash. On the other hand, some startups have great promise but little established success. Founders of such startups often meet dozens of investors before they manage to raise their first round of funding.

There are hundreds of articles on the internet that offer tips on establishing a better connect with potential investors and expediting the fund-seeking process, but that’s not all. A startup founder must look at many other things before approaching a VC firm for funding. We will take a look at some of these pointers below.


What separates investors from banks or other financial institutions is that apart from the money they put into the company, they also bring a strategic vision to grow your business. While banks only care about recovering the money they lend, investors have a larger stake in what you do and how you do it. This can be a double-edged sword.

While investors will help you with the networking and connections required for your business to succeed, someone whose plans for your business are diametrically opposite to what you have in mind may not be a good fit. It is natural for a bootstrapped startup founder to get all the investments they can in order to survive. But this may come back to haunt you if you choose an investor whose vision is not aligned with yours.


How many times have you heard the phrase “ideas are dime a dozen; it’s the execution that counts”? It might be hard to believe, but there have indeed been cases where prospective investors steal ideas or strategies to replicate in their own competing products. However, this is extremely rare.

What is common, though, is when confidential documents about your business are accessed by unauthorized third parties (including competitors). It is extremely important to protect these documents through secure virtual data rooms that restrict document access and keep your files secure. Investors need access to your business data for due diligence and making use of VDRs is absolutely essential during this process.


One of the major points of contention between a startup CEO and the investor is the amount of equity to offer in exchange for the cash infusion. At the outset, it may seem like a good deal to let go of as little equity as you can for the money you take. However, that may not always be a good idea.

This is especially true for early stage startups that need help from the investors in establishing networks and accelerate growth. Too little equity would make the deal less attractive to the investor and even if they had to take it, it wouldn’t motivate them enough to work for your startup in growing your business. But giving too much away would not only bring down your own motivation levels, but can also impact the future valuations and investments in your company.

It is therefore recommended to go for a sweet spot that makes both the investor and the owner happy. It is also worth mentioning that this only holds true if you are seeking sweat equity from the investor. A business that seeks investments solely to help with their financials must always work towards giving away as little equity as possible.


Startup founders can sometimes be so focused on the equity part during fund raising that they fail to take a holistic view of the process. A capital-intensive business will require a lot of cash infusion. You don’t have to take in less cash from the investors than what you ideally need just so you won’t breach the equity ceiling can be detrimental to both you and your investors. The right way to approach a fundraising process is by first establishing a growth plan and then understanding the capital infusion that this growth process will require. Once you have a good understanding of what it takes to reach your target, the next step is to see if diluting your equity would help you achieve that. Approach a VC firm only if this is the case. If you need to give away majority ownership of your firm solely to meet your funding goals, then it is a good idea to look at alternative funding opportunities like debt financing.

Entrepreneurs need to realize that the fundraising process is a level playing field where the stakes are high—not just for the founders, but for the investors too. Therefore, it is important to not sell yourself short. Building a startup can take years and diluting your equity or infusing too little cash can cause more harm than benefit any of the stakeholder in the long run.

Robin Singh

Robin is a Technical Support Executive and an ed-tech enthusiast with a combined experience of six years. He is well-acquainted with various knowledge-based tools and is passionate about writing on emerging technologies in the areas of knowledge management and role of knowledge-based tools in modern businesses. Working with numerous organizations has given him a hands-on experience in the application of knowledge-based tools in various sectors of business. His key areas of interest range from the strategies of managing knowledge in large organizations to handling all the areas of customer support in companies of all sizes. He is currently associated with ProProfs. In his free time, Robin enjoys reading, travelling and music.

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