For any startup to reach its full potential, the founding entrepreneur needs to know the funding stages associated with their company’s growth. The following funding primer covers pre-seed to IPO or acquisition.
Last updated: January 2026 to reflect the shift from ‘growth at all costs’ to ‘capital efficiency’ metrics.”
For those leading highly scalable startups, they must keep in mind that finding the right investor takes time and involves relationship-building that cannot be rushed.
Knowledgeable entrepreneurs invest the time to identify a potential investor. From there they ,nurture the relationship until they need the additional outside support and are ready to make a pitch for investment funding.
Entrepreneurs unfamiliar with fundraising often delay pursuing it until it’s urgent. This can lead to stress as their venture’s cash runs low.
When they finally approach investors while distressed, it may negatively impact how they are perceived. This occurs especially because some investors value certain traits in entrepreneurs that they believe are key to success.
In 2026, the startup funding landscape has evolved to prioritize capital efficiency and proven unit economics over “growth at all costs.” While the names of the stages remain the same, the requirements for each have become more rigorous.
The funding journey is typically viewed as a “ladder,” with each rung representing a reduction in risk and an increase in valuation.
Watch our full tutorial: How to Fund Your Startup: A Step-by-Step Guide (2026) on the podcast Experienced Voices.
Pluses and Minuses of Accepting Outside Capital
Limited access to capital can directly threaten a startup’s or any business’s ability to continue operating. This places everything the entrepreneur has invested.
Therefore, ensuring sufficient capital to grow the venture is one of the top—if not the top—priorities and challenges an entrepreneur faces.
Additionally, access to capital for women and minority entrepreneurs has historically been limited.
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For 2023, the World Economic Forum summarizes PitchBook’s U.S. dashboard as showing startups founded exclusively by women raised ~2% of total VC-backed capital.
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For 2024, PitchBook’s 2024 US All In: Female Founders in the VC Ecosystem report shows all-female-founded companies at 1.9% of total U.S. VC deal value (i.e., essentially “~2%”)
While progress is being made, women and minorities should be aware of this specific obstacle when planning the future of their startups.
In recent years, Black founders have historically received roughly 1% to 1.3% of total VC funding.
Most notable is the growing number of women-led venture capital firms being established.
Some investors believe entrepreneurs should delay accepting investor funding for as long as possible for several reasons. One reason is that it is time-consuming to find the right investor. This makes managing the venture more complicated. Also, once an investor has an equity stake, the entrepreneur becomes accountable to someone else.
On the other hand, the investor hopes they have selected the right person to invest in. They want someone who is coachable and willing to listen as the startup navigates the challenges of each growth stage.
Additionally, if the founder raises investor capital too quickly, it can reduce their ownership stake and that of family and friends who supported them early on.
In some cases, the founder may receive little or no financial benefit from their entrepreneurial efforts. This sometimes occurs at a time when outside investors gain significant rewards from the startup’s growing success. This depends on how successive funding rounds are structured.
Therefore, entrepreneurs must carefully evaluate their funding options. They should understand the core fundraising principles that match each growth stage of their startup.
Howard Lubert, a guest on the Experienced Voices™ podcast hosted by Jeanne Gray, discusses in the episode “What makes a Good Deal?” how the negotiated elements meet the needs of both the investor and the entrepreneur.
Five Funding Stages of Startups
| Stage | Focus | Typical Raise Amount | Key Investors |
| Pre-Seed | Idea/MVP | $50k – $250k | Founders, F&F |
| Seed | Product-Market Fit | $500k – $2M | Angels, Seed VCs |
| Series A | Scaling Revenue | $2M – $15M | Traditional VCs |
| Series B/C | Market Expansion | $15M+ | Late-stage VCs, PE |
The best advice for a fundraising entrepreneur is to build relationships. They should work to establish a network of experienced advisors who can help them avoid funding pitfalls.
They will assist the founder in positioning the startup to attract investors who can support its fundraising efforts through successive stages of growth.
Patrik Schmidle, Founder and CEO of CARI Health, shares on the Experienced Voices podcast, titled “How We Funded our Medtech Startup,”, describing the strategies of approaching investors. He emphasizes the importance of relationship building which is ,critical on the fundraising journey.
Here are the startup funding stages and the types of funding:
Pre-seed Stage: Laying the Foundation
The pre-seed stage includes several activities that set the foundation for attracting investor involvement later on. This stage involves writing a business plan and its initial execution.
This includes identifying potential team members, planning the development of products or services, and more. During this stage the entrepreneur is financing their own activities. Investors call this “putting skin in the game,” which they see as crucial for founders taking on venture risk.
For all entrepreneurs, especially first-time ones, this is a tough period because they are not used to tapping into their own savings. Their discomfort with using savings may last for a while. They are fighting to reach steady revenue, break even on profits, or achieve positive cash flow.
The entrepreneur must estimate how much of their own funds will be needed to reach these key milestones and become investor-ready. Entrepreneurs often underestimate the resources required to start a business. This highlights the importance of understanding funding options at each stage of their startup’s growth.
A savvy entrepreneur will “bootstrap” their venture whenever possible. This term describes the various activities an entrepreneur undertakes to advance their startup without outside funding.
Bartering is a good example of how a bootstrapping entrepreneur conserves their cash. For instance, they might negotiate lower rent in exchange for providing their landlord with their startup’s product or service.
After savings, friends and family are two key sources of funding during the pre-seed stage.
Later, when their investment is formally structured through the involvement of professional investors, the funding obtained from family and friends may be impacted.
The entrepreneur should seek out advice to ensure that early money does not impede their ability to obtain funds from professional investors such as angel investors and venture capital firms.
In 2026, the ‘Pre-Seed’ round has professionalized. While many founders still rely on the $100,000 to $250,000 range from Friends and Family, the market median for a formal Pre-Seed round has settled at roughly $700,000.
Investors at this stage now expect at least a functional prototype or significant ‘Customer Discovery’ data from 50+ potential users.
Seed Stage: Proving the Concept
A startup advances to the seed stage when the founders’ efforts are practically moving the company forward. Investment is helping the company reach an initial series of milestones.
One key milestone is a proof-of-concept that confirms the validity of a startup’s product or service idea. Plans to make the product or service market-ready can start in the pre-seed stage. It may continue to develop during the seed stage, depending on the product or service and the startup’s industry.
For example, building a working prototype can serve as enough proof of concept to attract outside funding from an investor who fully recognizes the significance of this milestone in their specific industry.
But for another startup in a different industry, the proof of concept might be landing the first customers who provide testimonials after full use of the product or service. Yet another investor might feel proof of concept is reached when there are repeat sales.
The founding team may also use this period to conduct market research to solidify their go-to-market strategy for a defined customer segment. An advisory board may also be set up, possibly with the intent that one or more join the venture once it is funded.
Therefore, funding at the seed and other stages is determined by a combination of factors, including the industry, the entrepreneur, and the startup’s stage.
The bar for Seed funding has risen. To secure a median round of $3.1 million, most non-AI startups are now expected to show early revenue signals. This is typically between $30,000 and $50,000 in Monthly Recurring Revenue (MRR). Dilution at this stage typically hovers around 19%, though top-tier accelerator graduates often negotiate this down to 10-12%.
Friends and family who have significant resources may still be involved, but typically, professional investors are the primary source of funding in this stage.
Some venture capital firms also invest in the seed stage, but most tend to fund later stages with lower risk. This is because a venture capital fund is a pool of other people’s money, unlike an angel investor, who are high-net-worth individuals,
VC firms prefer to see increasing revenues, a seasoned senior team, and well-established operations that help the startup move beyond major early challenges, among other requirements.
Angel investors who are high-net-worth individuals are often entrepreneurs who have successfully exited a venture. They are flush with funds to invest in the risky early growth stages of startups.
They, along with some seed-stage venture capital firms, formalize funding in exchange for a piece of equity in the startup, which is consummated via a term sheet.
Entrepreneurs should seek out accelerators that provide both training and seed funding. Some accelerators focus on specific industries, and others have somewhat of a geographic slant. Most of the top U.S. startup accelerators have taken startups from early-stage through to successful IPOs.
Common advice for entrepreneurs seeking investor money is to choose an investor with experience in the same industry. This is known as domain experience.
In addition to capital, an angel often brings with them a network of contacts, such as future customers or additional investors. They will also serve as early advisors to the entrepreneur during periods of great challenge.
Keep in mind that investors with little industry experience may be less supportive during setbacks. Something that is almost inevitable for startups.
The amount of money raised during the seed stage may range from thousands to millions of dollars, determined by a range of factors previously noted. In discussions with an investor, the startup’s valuation comes to the forefront as a key factor in how much equity the investor will receive in exchange for the investment sought by the entrepreneur.
In the simplest of terms, a startup has a pre-money valuation before an investor comes in. The expectation is that their investment into a startup will have a great impact. A post-money valuation curs which is greater. Having gained the necessary funds to grow the startup, the next major milestone is reached.
For example, if a company is valued at $4 million (pre-money) and raises $1 million, the post money valuation is $5 million and the investor owns 20%.
From the investor’s point of view, they want to enter into a startup at a point when their money will have the greatest impact on the startup. The entrepreneur, when pitching to an investor, should assure them that their funds will be put to the best possible use—and timely for the venture.
Experts and experienced service providers such as accountants, lawyers, and seasoned entrepreneurs who have experience with fundraising are sources of advice during this stage.
In the Experienced Voices podcast episode “Taking Your Startup to Exit”, guest CFO Bal Bhullar discusses the financial foundation that a startup is building from its first founding through going public or being acquired.
She offers the perspective of a chief financial officer with extensive experience working with entrepreneurs and executives as they grow their companies and require additional funding.
What is ultimately negotiated between investors and entrepreneurs may potentially impact successive fundraising rounds. Therefore, the entrepreneur should clearly understand the terms of the investment that they agree to, because it may make future fundraising easier or harder for them.
For further details, read Seed Funding Explained: How to Raise and Scale in 2026
Early Stage: Series A Scaling
An early-stage startup has achieved something very important. Many seed-stage startups never reach this point, although they can still become successful and profitable. Investors at this stage, usually venture capital firms, expect the startup to have reached a level where they can more clearly project revenue, which is now expected to grow quickly, prompting the need for outside funding.
Raising a Series A is now a rigorous ‘Fundamentals’ test. In today’s market, a successful Series A usually requires a minimum of $1M to $3M in Annual Recurring Revenue (ARR). Expect a ‘priced round’ where you will sell roughly 20-25% of your company. In 2026, investors are specifically looking for a ‘Burn Multiple’—how much you spend to generate each dollar of new revenue—of less than 1.5x.
They also expect the entrepreneur to possess the skills and experience to implement the operational support required for growth. This includes recruiting senior team members needed to fill key roles emerging within the startup.
With revenues on the rise, entrepreneurs and investors expect the startup’s valuation to grow as well. This acts as a strong incentive for investors to join a startup at the right moment. They are now entering a stage with less risk than the seed stage and can more clearly see potential rewards, such as a successful exit through going public or being acquired.
Venture firms with a long history and strong reputation are typically Series A investors. Afterward, these firms reach out to other companies to participate in the funding round. Venture capital firms generally invest significantly more capital than earlier investors and therefore have greater influence on the startup. Often, this includes one of their members joining the startup’s board.
Crowdfunding through platforms like Kickstarter and Indiegogo can also be part of Series A funding, as entrepreneurs look for alternative sources to meet their funding needs when their venture capital raise falls short.
Watch our full audio tutorial: How to Determine if Your Startup is VC Ready on Experienced Voices.
Growth Stage: Series B and C and Beyond
Startups in the growth stage are on track for significant success, with a higher chances of going public or being acquired. Series B funding is primarily used to expand departments and hire additional staff across marketing, product development, sales, and other areas.
During this period, funds might be allocated to developing and launching new product lines and hiring new talent. The significantly larger startup could acquire smaller competitors or strategic partners and potentially merge. These activities require substantial capital, usually provided through follow-on funding from venture capital firms, including investors who participated in earlier rounds.
Series C raises are similar to Series B in addressing the growing needs of the venture, especially if the venture aims to compete in the global market. Hedge funds and private equity firms might participate at this stage, given their strong performance and clear projections for future growth.
By the time a startup hits Series B, the conversation shifts from ‘can this work?’ to ‘how fast can this grow?’ The median Series B valuation in 2026 has climbed to $102 million, with investors looking for a clear path to $10M+ ARR. For the rare ‘Unicorn’ path, Series C rounds are often the bridge to an IPO, with valuations exceeding $1 billion and dilution dropping to roughly 7-10% per round
Other funding raises through Series D, E, and others may follow, resulting in hundreds of millions of dollars in funding, and high valuations for the company.
Startups with valuations over $1 billion are achieved during later funding stages (Series C +) and are now termed as unicorns due to their great success and rare achievement.
Exit Stage: IPO or Acquisition
Entrepreneurs must remember that any investor funds they accept are provided by investors who want their money back with a profit. Entrepreneurs who understand the investor’s role at each stage of a startup’s growth are more likely to secure funding.
Some entrepreneurs mistakenly think that angel investors and even venture capital firms invest out of friendship. While there may be some excitement about gaining investor involvement, investors generally expect about a seven-year period for their investment to be returned and considered successful—meaning they seek a return on their investment.
A startup that grows quickly can either go public on the stock exchange or be acquired. These are the main ways for an investor to recover their funds, which can then be reinvested into more startups.
Mastering Your Funding Strategy
Understanding these stages is the first step toward securing your startup’s future. Whether you are currently bootstrapping in the pre-seed phase or preparing for a Series A raise, staying informed on the evolving capital landscape is essential for any savvy founder.
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