Early-Stage Startup Fundraising 101 | Article – HSBC VisionGo

Fundraising is vital for startup growth. In this article, we discuss four areas to guide you to success

fundraising-101

Fundraising is vital for startup growth. The landscape is saturated and competitive, so founders need to understand and nail every step of the process. We discuss four areas to guide you to success.

The ecosystem

Understanding who you are talking to is essential because you want to explore avenues of investment that fit your startup’s profile. The three primary types of investors are:

  1. Government: Funding from the public sector typically comes in the form of grants, facilities, and subsidies. They will require the startup to fit eligibility criteria, which align with their agenda to promote innovation in the country. 

  2. Incubation and acceleration programs: They provide early-stage startups with business support and mentorship. The programs are usually region-specific or sector-focused, where startups are incubated in cohorts. 

  3. Angel investors, family funds, and venture capitalists (VCs): These investors can offer a wealth of collaboration and mentorship opportunities. They have different investment theses and usually operate in specific sectors. 

Valuation

When your startup is at an early stage, it’s not always clear when you should begin reaching out to investors and which investor-type is most suitable. Step one is determining your valuation. Here are some general rules of thumb:

Step two is identifying the right type of investor: 

Investor considerations

Investors evaluate many factors when assessing a potential portfolio company. One common concern is the likelihood of an exit further down the line, whether it’s through a strategic buyer, later-stage VC, private equity acquisition, or initial public offering. An investor’s aim is financial return, so their primary considerations are:

 

Due diligence

Regardless of the type of investor you work with, you will have to go through due diligence. While the process varies, it generally follows this structure:


Fundraising is a continuous process. It’s crucial to align your presentation with the investor’s point-of-view and investment thesis. It should never be about the capital itself, but how you can use it to scale your startup into a business with value.