Raising capital is a test of clarity, preparation, and conviction. Founders step into the fundraising process both to secure money and to invite partners into the company. The decisions made here shape growth, ownership, and even reputation for years to come, and effective fundraising can set a strong foundation for growth. Below, we’ll discuss how investment fundraising really works, what it demands from businesses, and what it takes to do it well.

What’s in this article?

• What is investment fundraising?
  
• How does the investment fundraising process work?
  
• What funding options are available to businesses?
  
• How should businesses prepare for fundraising?
  
• What documents and materials do investors expect to see?
  
• What are the common challenges businesses face with fundraising?
  
• How do successful businesses build long-term investor relationships?
  
• How Stripe Atlas can help
  

What is investment fundraising?

Investment fundraising is how businesses bring in outside capital to grow faster than they could with internal cash flow alone. Instead of relying only on profits or personal funds, founders invite outside partners (e.g., angel investors, venture capital firms, private equity, even friends and family) to back their visions with money and, often, expertise. It’s a common practice: in 2024, global venture capital investment totaled $368.3 billion across 35,684 deals.

It’s essentially a trade; investors supply capital today in exchange for the chance to share in the company’s future success. That might involve equity, debt, or hybrid structures such as convertible notes. Each path comes with its own expectations about control, risk, and return.

Fundraising sets the pace for growth, signals credibility to the market, and often shapes company strategy. The investors you bring on board can influence product decisions, help you reach new customers, and shape future financing.

Successful fundraising means building the kind of capital base and investor relationships that let a company scale sustainably.

How does the investment fundraising process work?

Fundraising unfolds in distinct stages. While no two journeys look identical, the arc is usually the same: planning, outreach, negotiation, and close.

Setting the foundation

Founders sharpen their stories before they talk to investors. This means refining the business model, creating a clear financial road map, and understanding what type of capital makes sense. A compelling pitch deck distills the company’s mission, market, traction, and growth plan into a narrative investors can quickly absorb.

Identifying investors

The right investor fit matters as much as the amount raised. Early-stage founders often target angels, seed funds, or startup accelerators. Growth-stage businesses look to venture firms, private equity, or strategic investors. Building a target list is about matching the company’s sector, stage, and ambition with investors who can offer both capital and useful networks.

Outreach and pitching

Once the list is built, outreach begins. This stage creates momentum: schedule investor meetings close together, refine the pitch in real time, and gauge interest. Investors expect clarity on the problem being solved and the size of the opportunity, as well as evidence of traction.

Due diligence

If they’re interested, investors dig deeper. They review financial statements, the legal structure, intellectual property (IP), customer contracts, and team credentials.

Negotiating terms

When an investor is ready to commit, they issue a term sheet that outlines valuation, ownership, rights, and governance. It’s not the final contract, but it sets the framework for deal documents. Founders negotiate here to balance their immediate needs with long-term flexibility.

Closing the round

In the final stage, agreements are signed, funds are wired, and new investors join the cap table. This moment often introduces new expectations for reporting, board seats, or performance milestones.

Fundraising is rarely linear. Rounds can stretch longer than expected and investor interest might ebb and flow. What matters most is thinking of your business goals throughout the process.

What funding options are available to businesses?

Businesses can raise capital in more ways than ever, but the options typically fall into a handful of categories. Each comes with trade-offs in cost, speed, and control. The right choice depends on the stage of the company, its appetite for risk, and its growth ambitions. Here’s a closer look.

Equity financing

Investors provide cash in exchange for ownership. This can come from friends and family, angel investors, venture capitalists, or private equity. Equity helps reduce financial pressure since there are no fixed repayments, but it dilutes the founder’s stake and often adds governance requirements.

Debt financing

Traditional loans, lines of credit, and revenue-based financing offer businesses cash without requiring them to give up ownership. Banks, online lenders, and specialized funds are common sources. Debt keeps equity intact but requires repayment regardless of performance, so it works best when cash flow is predictable.

Hybrid instruments

Convertible notes and simple agreements for future equity (SAFEs) are common in early-stage fundraising. They let investors put in money now with the expectation of converting to equity later (usually at a discount), after a priced round.

Alternative sources

Crowdfunding platforms allow businesses to raise smaller amounts from large groups of backers. Grants and competitions, while they’re less common, offer nondilutive funding. Strategic investors (corporations that invest for strategic reasons rather than purely financial ones) can also provide capital along with distribution channels or partnerships.

Internal funding

Self-funding using savings, retained earnings, or bootstrapping remains a viable path, particularly early on. It gives founders complete control but limits how fast the business can scale.

How should businesses prepare for fundraising?

Fundraising is rarely won in the pitch meeting itself. How prepared a business is often determines how easily the process goes and how much leverage founders have at the negotiating table.

Here’s how to prepare to make investors believe your company is worth betting on:

• Clean, audited financials: Balance sheets, income statements, and cash flow statements should be current and accurate. Gaps or inconsistencies can appear as warning signs.

• A forward-looking model: A strong financial model demonstrates growth potential and resilience in different scenarios. Investors want to see how revenue scales, where margins can improve, and how long the cash reserves last.

• Cap table clarity: A disorganized ownership structure signals risk. Clearly detailing equity allocations, convertible instruments, and option pools is nonnegotiable.

• Organized data room: Having your core documents (e.g., incorporation papers, contracts, IP filings, employment agreements) in a secure, accessible repository can speed up the due diligence process.

• Compliance records: Get your tax filings, licenses, and regulatory documents in order before investors ask for them.

• Pitch refinement: Your story needs to be sharp. What problem is being solved, why is the timing right, and how is your team positioned to win? The best pitches combine numbers with urgency.

• Competitive awareness: Be ready to speak in detail about competitors, substitutes, and market trends. Investors expect founders to know the terrain better than anyone else.

• Shared expectations: Founders and early team members need to agree about how much capital to raise, what trade-offs in equity they’re comfortable with, and what type of investor they want to bring in.

• Clear roles: Investors often meet senior leaders individually. Confusion or mixed messages across the team can be a warning sign.

What documents and materials do investors expect to see?

When investors start looking seriously at a business, they expect a complete package. Having certain materials in place signals seriousness and can make the due diligence process easier and faster. Here’s what investors expect to see:

• Pitch deck: A concise, visually clear presentation that shows the problem, solution, traction, market size, competitors, business model, and team.

• Executive summary: A one- or two-page overview that can be circulated internally at the investment firm. Think of this as the written snapshot that’s shared beyond the meeting room.

• Financial statements: Recent income statements, balance sheets, and cash flow statements.

• Financial model: A forward-looking projection that shows how growth, margins, and cash needs develop over the next several years. Investors use this to test assumptions.

• Cap table: A clear record of who owns what, including equity, convertible notes, SAFEs, and option pools.

• Incorporation documents: Articles of incorporation, bylaws, and shareholder agreements.

• IP documents: Patents, trademarks, or licensing agreements.

• Contracts: Major customer, supplier, and partnership agreements that underpin revenue.

• Market research: Third-party data, industry reports, or customer surveys that validate the opportunity.

• Team bios: Short, relevant profiles that demonstrate your expertise and ability to execute.

What are the common challenges businesses face with fundraising?

Fundraising is dynamic and demanding. Companies that succeed anticipate challenges, prepare thoroughly, and stay sharp even when money is coming in.

Here are some of the most common challenges:

• Economic cycles: Rising interest rates, inflation, or geopolitical uncertainty can make investors more cautious and extend fundraising timelines.

• Valuation resets: Market corrections in tech and other sectors mean startups face tougher negotiations, with investors demanding lower valuations or stronger proof points.

• Due diligence: Investors usually want data-driven evidence before they commit capital. This might include customer acquisition costs, retention rates, and unit economics.

• Selective check writing: Even when capital pools remain large, some investors concentrate on fewer deals and back companies with clear competitive potential.

• Founder bandwidth: Building decks, running models, and meeting investors can take months. The process often pulls founders away from operating the business.

• Momentum management: Rounds rarely close in a straightforward manner. Keeping investor interest alive across weeks of back-and-forth requires strategy and stamina.

• Team unity: Disagreements about valuation targets or terms can surface under pressure. If investors notice, that can undermine their confidence.

How do successful businesses build long-term investor relationships?

Strong investor relationships compound over time. They give companies a durable support system that can help with inevitable challenges and accelerate opportunities that wouldn’t surface otherwise. Here’s how to set yourself up for successful long-term relationships with your investors.

Lead with transparency

• Send out regular updates (e.g., monthly, quarterly) that go beyond vanity metrics and share both wins and setbacks. Honesty is important here.

• Be consistent in how you present your data. When companies raise additional capital later on, a strong reporting record speaks for itself.

Engage strategically

• Ask for introductions to customers, talent, or future investors. It signals respect for the investor’s expertise and can expand your business’s reach.

• Set boundaries from the start about what level of involvement is welcome, what decisions remain with the founders, and how board oversight should function.

Think beyond the current round

• Think about the long term. Many venture capitalists back multiple rounds in the same company. Relationships built on shared vision and reliability often lead to faster follow-on funding.

• Be mindful of your reputation. Investors do their own evaluations and talk to one another. A track record of transparency and thoughtful engagement can make future fundraising substantially easier.

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, and get started today.