Raising Capital: Where to Start

Written by Amanda Bower    |    Published: May 31, 2023

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The world revolves around money, especially when launching a successful business. Even experienced entrepreneurs need to secure funding to take their ventures to the next level. 

To do this, you need to have serious skills and knowledge to navigate the complex world of fundraising. Every savvy CEO knows how to hustle for capital, and for startups, it’s doubly important. 

Let’s face it, raising capital is no easy feat. It’s a multifaceted game that involves different rounds, strategies, and trade-offs. Moreover, it’s all about who you know and how you pitch. 

Luckily, you’ve found the right place to learn how to become a fundraising pro. We’ll equip you with everything you need to know to get that cash flowing.

The Role of Accounting in Raising Capital

Before you even think about going to investors, it’s essential to have a thorough understanding of your accounting. It’s a major factor in raising capital and can greatly impact the success of the process.

Here are a few main ways accounting plays a role in the fundraising process:

  • Financial reporting: Investors will take a hard look at your startup before they pull out their checkbooks. They’ll likely request financial reports and statements and look at balance sheets, income statements, and cash flow statements. Financial reporting gives potential investors an inside look into the financial health of your business.
  • Valuation: Accounting and other financial data will ultimately determine the value of your business. This valuation is key when speaking with potential investors because it lays the groundwork for deciding things like the equity they’ll receive in exchange for their investment.
  • Due diligence: Investors typically conduct what’s called due diligence to evaluate the health of a company. This process involves thoroughly reviewing all financial statements, including accounting records and tax filings. In order to successfully complete due diligence, startups need to have excellent HR record-keeping practices and maintain accurate and well-documented accounting records, which can hold up to scrutiny. 
  • Financial projections: Where is your business heading? Investors will want to know the answer to that question and will likely comb through your financial forecasts and analyses. These projections provide insights into expected revenue, expenses, profitability, and potential growth. 
  • Compliance: There are plenty of aspects of accounting compliance that startups need to follow to stay aligned with standards, laws, and regulations. If you want to raise capital, you’ll need to show investors you comply with accounting and regulatory requirements. 

You’ll want to place significant emphasis on managing and assessing risks, as well as establishing strong connections with potential investors. It’s critical to possess strong accounting proof to instill investor confidence and promote the growth of the business.

What Do You Need to Begin Raising Capital?

Simply understanding the requirements and general practices for raising capital isn’t enough. You’ll need to have a few things handy before you start seeking investments, particularly when it comes to the financial and accounting aspects of your business. 

Here are a few things that will be necessary before raising capital:

  • Rock-solid books: Effective bookkeeping is crucial in showing investors the financial stability of a business. Investors will closely examine your books, so your business must establish and maintain excellent bookkeeping practices. This also can encompass other key accounting functions such as bank account reconciliation, credit card reconciliation, employee expense management, A/P management, fixed asset accounting, and revenue recognition. 
  • Thorough reporting practices: Reporting is crucial, and your fundraising process heavily relies on your reporting practices. To ensure success, you should create monthly P&L statements, balance sheets, and cash flow statements and keep track of standard financial KPIs.
  • A budget: Your startup’s annual budget is your source-of-truth document explaining how your business will use its money and what costs you expect to accrue. It should include fixed expenses, variable expenses, sources of capital, and monthly revenue. Budgets are typically created once a fiscal year.
  • Financial forecasts: Financial forecasts are similar to budgets but have some distinct differences. Forecasting uses historical data to estimate and predict how your company will perform financially in the near future, taking outside variables and factors into effect. Your potential investors will want to see these forecasts to see how your business will perform. 
  • 100% accurate taxes: Business taxes can be a pretty big lift, and they’re often complex since they integrate with things such as payroll. But partnering with an outsourced tax provider can make handling taxes a simple and easy process. Your taxes shouldn’t be something to hold you back from an investment. Instead, you should have accurate tax records and documents (including any materials related to any tax audits you were subjected to). 

In short, proper accounting is one of the main things you need before raising capital. Month after month, year after year, your accounting practices must be thorough, error-proof, and comprehensive. Not only does it matter for your business, but it matters for your potential investors. 

What Are the Different Funding Rounds?

Raising capital is usually done through a process referred to as series funding. Your first investments are called seed funding, and after that, funding happens in different rounds. At each round, the business grows by exchanging equity for capital. Your business will have to hit certain milestones before completing the next round of funding, and the business goes through a new valuation at each round.

  • Seed Funding: 

This initial round of funding is called Seed funding, and it can come from founders themselves, family members, venture capital (VC) firms, or even Angel investors (which we’ll explain in a little while). 

  • Series A Funding:

In order to progress to Series A funding, a business needs to demonstrate that it will earn sustainable profits. Roughly, your startup typically needs to have at least $5 million in ARR, and 3x year-over-year growth. At this stage, investors are looking for powerhouse ideas that are shown to make money, and VC firms might play a substantial role in the investments (crowdsourcing is also common). The median Series A in the US was $13.75 million in January 2023.

  • Series B Funding:

In order to get to Series B funding, your business needs to hit certain milestones, and generally needs to have demonstrated a high degree of success. Similarly to Series A funding, Series B funds typically come from VC firms (and they might have certain milestones regarding things like growth and cash before they want to invest). In 2023, the median size of Series B rounds is $25 million.

  • Series C Funding

Series C funding is an even more advanced stage of funding, and it might happen as your organization experiences immense growth from things such as moving into new markets, or when buying another business. Series C funding is often completed by large investor groups, such as VC funds, hedge funds, or private equity firms. Series C rounds result in an average of $50 million. 

Funding rounds can continue into Series D funding, and sometimes even Series E. If a company is looking to complete an initial public offering (IPO), they typically go through three rounds of funding.  

What Kinds of Strategies Are There?

If you’re seeking investments for your business, you may have noticed there are various types available. Let’s break it down into some of the most common ones and what they mean.

Equity Financing

This is when you sell your business shares to investors in exchange for capital. You don’t typically need to repay the money you receive; if your company fails, shareholders do not receive their money back. 

Angel Investors

These wealthy individual investors use their high net worth to fund startups with their own money. The support and guidance provided by these experienced investors can help ensure success.

Venture Capitalists

A venture capitalist, or VC, takes a stake in your business in exchange for equity and focuses on businesses with a high growth potential. They typically look to exit while achieving an attractive return on their investment. 

Initial Public Offering (IPO)

When a company decides to go public, it essentially means it’s offering its stocks to the public for the first time. Going public allows the company to raise capital from a wider pool of investors, enabling them to invest in new projects, research and development, and other growth-oriented initiatives. 

Debt Financing

When a company requires additional funds to finance its operations or invest in new projects, it can borrow money from various sources, such as banks, credit unions, or private lenders. In exchange for receiving the capital, the company agrees to repay the borrowed amount plus interest over a specified period.

Bank Loans

Bank loans are a form of debt financing. This is when a business borrows money from a bank, usually with fixed repayment terms and interest rates. 

Lines of Credit

A business can use a credit card to access pre-approved funds, which is another form of debt financing. The borrowed amount incurs interest charges.


Crowdfunding involves raising funds from a large group of people, typically over the internet. This can be done in exchange for rewards or equity or as donations.


Business grants are funds provided by a government, foundation, corporation, or other entity without the need for repayment. However, there may be specific requirements attached to these funds.

Incubators and Accelerators

Incubators and accelerators are similar to mentorship programs that provide startups with education, resources, and guidance. Incubators are usually open-ended, might be fee-based, and might have rolling admission. Accelerators are growth-based, for a fixed duration, and might involve a specific cohort. 

How Does an Outsourced CFO Help?

Raising capital involves more than just obtaining funds. If you struggle with the intricate process of raising capital, don’t worry. Consider seeking the assistance of an outsourced CFO.

While they may not be directly involved in securing capital, they can provide valuable assistance by helping you prepare and connecting you with relevant resources. These experts use CFO strategies to offer top-notch financial support on an outsourced basis.

Outsourced CFOs typically handle things such as: 

  • C-Suite and founder consultations
  • Interfacing with external partners
  • Investor/board reporting
  • Financial planning and analysis
  • Support financing and fundraising needs

Why spend your valuable time on tasks that experts could better handle? Trust the professionals and concentrate on what truly counts: reaching your goals with the greatest impact and minimal effort. 

Outsourcing CFOs is an instance of business process outsourcing (BPO). By entrusting critical responsibilities to skilled and experienced professionals, you can focus on your core competencies and attain your objectives more efficiently and effectively.

Strong Financial Systems Increase Funding Chances

Raising capital is like playing the long game. The better your financial systems are, the more likely you are to receive funding. Don’t skimp on your accounting game—it could be the difference between success and failure in your fundraising endeavors.

Looking to level up your business’s finances? We provide best-in-class outsourced accounting services to startups that are looking to grow. Check out what we offer today.

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