Every year, millions of new businesses launch in the US alone, yet only a small fraction raise venture capital (VC) funding. The bar is high and the market moves constantly: in 2024, there were more than 14,000 VC deals in the US, with a total worth of $215.4 billion.

Raising VC can take months of meetings and follow-ups before a deal comes together. While the VC path might be complicated, understanding how the process works can help you create a successful plan. Below is a guide to raising VC, including what to expect, where VC fits into the investment environment, and how to get from your first pitch to a signed term sheet.

What’s in this article?

• What is venture capital funding?
  
• How does venture capital differ from other forms of investment?
  
• How can you get venture capital funding in six steps?
  
• Frequently asked questions about venture capital funding
  
• How Stripe Atlas can help
  

What is venture capital funding?

Venture capital is equity financing for early-stage companies with high growth potential but limited access to traditional funding. It’s designed for startups that are chasing big markets and gives founders capital to scale their ideas quickly, along with important support from a network of operators, advisers, and major partners.

A VC firm pools money from institutional investors and wealthy individuals to invest in a portfolio of startups. Unlike a loan, VC funding buys ownership. Investors take preferred shares (and often a board seat) and play an active role in guiding the company. Rather than repayment, they expect revenue growth.

Funding happens in stages such as seed, Series A, and Series B. Each stage is larger than the last and tied to clear milestones such as product validation, revenue traction, and market expansion. The goal is to help a company scale quickly enough to reach a liquidity event, such as an acquisition or initial public offering (IPO).

How does venture capital differ from other forms of investment?

Unlike traditional investors, who expect repayment for the capital they put in plus interest, VCs buy ownership. They offer startups the chance to grow faster than revenue alone would allow, and they take on the high risk of failure. In return, companies give them a portion of the founders’ equity.

VC is a high-risk, high-reward model. A 2023 analysis estimated that 75% of venture-backed startups fail. This math works out for investors, because a few exceptional outcomes make up for the majority that return little or nothing.

Other funding paths work differently:

• Angel investors: While VCs and angel investors are both early-stage funders, angel involvement is personal rather than institutional. Angels invest their own capital, often in six-figure amounts, and back founders they believe in. They might also decide to join a board, mentor the team, or introduce early customers.

• Corporate VC: With corporate VC, large companies invest in smaller ones, often to stay close to emerging technology or to position themselves for future acquisitions. They’re incentivized by long-term considerations as well as financial returns.

• Bank loans: A bank’s goal is to be paid back on schedule rather than to risk uncertainty for potential returns. This model favors businesses with steady income and tangible assets, which can make it a bad fit for startups.

• Bootstrapping: With bootstrapping, growth comes from revenue rather than outside capital. A bootstrapped company scales only as fast as its profits can fund, which builds resilience but caps growth speed.

• Crowdfunding: Early crowdfunding spreads risk across many small backers. This tactic can fund a prototype or validate demand, but it rarely provides deep expertise or leads to long-term relationships.

How can you get venture capital funding in six steps?

Getting venture capital for a startup requires persistence, timing, and endurance. Founders often spend months refining their stories, adjusting strategies, and taking meetings before they begin actively pitching VCs. VCs are selective, because this type of investment works for only a very specific type of business.

Here are six main steps to secure VC funding.

Decide whether VC makes sense for your business

Clarify what kind of company you’re building. VC works for businesses that chase huge markets and move fast enough to dominate them. Investors typically expect a liquidity event (an acquisition or IPO) within a decade. A local-service business, or one with steady rather than exponential growth, doesn’t match this funding path.

Build a great team that gets some traction

VCs bet on people first. They’re looking for a founding team that’s trustworthy and adaptable, attracts talent, and has a good mix of technical, product, and business skills. They also want some evidence that your idea has purchase. This doesn’t have to be revenue, but it should be something solid: a working prototype, early users, pilot customers, or a growing waiting list.

Get your legal and financial foundation in order

No investor wants to fund chaos. Before you start contacting VCs, ensure you’re properly incorporated. Many venture-backed startups are Delaware C corps, because that structure offers straightforward equity and investor rights. Clarify company ownership with documentation and an employee option pool. Finally, protect your intellectual property (IP) by filing necessary trademarks or patents, and assure that founders have assigned all rights to the company.

Craft a sharp pitch

The best pitch decks are narratives that answer five questions:

• What problem are you solving?

• Why is your solution different or inevitable?

• How large is the market if you succeed?

• What proof do you have that your solution is working?

• What funding are you asking for and what milestones will it enable?

VCs look at thousands of decks. Make yours stand out with a simple, clear design and precise data. Pair your deck with a short “data room” that includes your cap table, important metrics, and any customer references so you’re ready when interest builds.

Target the right investors

Not every investor fits every company. Find firms that invest in your stage and sector, as well as individual partners whose track records show genuine interest in your kind of business. Look at portfolio overlaps and check size and geography. For example, a fintech startup in its seed round shouldn’t pitch a growth-stage consumer fund.

Once you’ve curated your target list, use your research to customize your outreach. Write an intro message about who you are, who they are, and why you’re a great fit.

Pitch, negotiate, and close

Once interest turns serious, it’s time for diligence. Investors will dig into your financials, contracts, metrics, and governance. If everything checks out, you’ll receive a term sheet: a summary of valuation, investment amount, ownership percentage, and governance rights. These documents are nonbinding but signal intent. It’s a good idea to have a lawyer with experience in venture deals review these documents. Pay attention to valuation, liquidation preference, anti-dilution rights, and board composition.

Having multiple offers, even informal ones, strengthens your negotiating position. It’s common for investors to syndicate, which is when a lead investor sets the terms and others join in. If the process moves forward, the deal is made, legal paperwork is completed, and the funds transfer.

Closing is the start of a long partnership. Smart founders treat investors as major allies and keep up steady communication. Once you’re on the VC track, closing is only the beginning. Those relationships often shape what comes next.

Frequently asked questions about venture capital funding

How hard is it to get VC funding?

VC funding is extremely competitive. While VC has powered many of the world’s most influential tech companies, it’s rare for businesses to secure VC. That’s largely because the model fits only companies that are positioned for unusual growth. Founders often meet with dozens of firms before they land a single term sheet.

How should I approach a VC for funding?

VC is fueled by relationships, and warm intros raise your odds. You can meet VCs through your mentors, your peers, and even your lawyer, who might know which investors are active. Frequent conversations help you learn about your sector, refine your pitch, and re-engage as you build more traction.

How do you get venture capital funding in the UK?

The UK has a strong VC environment centered in London, Cambridge, and Edinburgh. This is supported by programs such as the Enterprise Investment Scheme and Innovate UK grants. The pitching process mirrors that of the US: incorporate cleanly, show traction, and find a firm that’s a good fit.

How Stripe Atlas can help

Stripe Atlas sets up your company’s legal foundations so you can fundraise, open a bank account, and accept payments within two business days from anywhere in the world.

Join 75K+ companies incorporated using Atlas, including startups backed by top investors like Y Combinator, a16z, and General Catalyst.

Applying to Atlas

Applying to form a company with Atlas takes less than 10 minutes. You’ll choose your company structure, instantly confirm whether your company name is available, and add up to four cofounders. You’ll also decide how to split equity, reserve a pool of equity for future investors and employees, appoint officers, and then e-sign all your documents. Any cofounders will receive emails inviting them to e-sign their documents, too.

Accepting payments and banking before your EIN arrives

After forming your company, Atlas files for your Employer Identification Number (EIN). Founders with a US Social Security number, address, and cell phone number are eligible for IRS expedited processing, while others will receive standard processing, which can take a little longer. Additionally, Atlas enables pre-EIN payments and banking, so you can start accepting payments and making transactions before your EIN arrives.

Cashless founder stock purchase

Founders can purchase initial shares using their IP (e.g., copyrights or patents) instead of cash, with proof of purchase stored in your Atlas Dashboard. Your IP must be valued at $100 or less to use this feature; if you own IP above that value, consult a lawyer before proceeding.

Automatic 83(b) tax election filing

Founders can file an 83(b) tax election to reduce personal income taxes. Atlas will file it for you—whether you are a US or non-US founder—with USPS Certified Mail and tracking. You’ll receive a signed 83(b) election and proof of filing directly in your Stripe Dashboard.

World-class company legal documents

Atlas provides all the legal documents you need to start running your company. Atlas C corp documents are built in collaboration with Cooley, one of the world’s leading venture capital law firms. These documents are designed to help you fundraise immediately and ensure your company is legally protected, covering aspects like ownership structure, equity distribution, and tax compliance.

A free year of Stripe Payments, plus $50K in partner credits and discounts

Atlas collaborates with top-tier partners to give founders exclusive discounts and credits. These include discounts on essential tools for engineering, tax, finance, compliance, and operations from industry leaders like AWS, Carta, and Perplexity. We also provide you with your required Delaware registered agent for free in your first year. Plus, as an Atlas user, you’ll access additional Stripe benefits, including up to a year of free payment processing for up to $100K in payment volume.

Learn more about how Atlas can help you set up your new business quickly and easily, or get started today.