How to raise money for a startup, step by step

How to raise money for a startup, step by step

A first funding round is a project with a start, a middle and an end. This guide takes a first-time founder through it in order, with the UK and US rules where they differ and a checklist at the end. If you are not yet sure you should raise at all, read Should you raise money at all? first.

The market is active but selective. In the US, there were an estimated 5,674 first-time venture financings in the first half of 2026, putting the year on pace for a record, while rounds of $100 million or more took 87.5% of the $412.7 billion invested, according to the PitchBook-NVCA Venture Monitor (Q2 2026). In the UK, seed-stage deal numbers among smaller businesses fell 27% in 2025 while seed investment held steady at £2.1 billion, the British Business Bank's Small Business Equity Tracker 2026 reports: the money is there, spread across fewer companies.

Step 1: Decide how much to raise and what it is for

Start from what the money has to achieve, not from a round size you have heard about.

1. Name the milestones. What must be true when this money runs out for the next round, or profitability, to be possible? A launched product, paying customers, a revenue level, a regulatory approval.
2. Cost the plan month by month. People, product, marketing, premises, legal and accounting. The monthly net cash outflow is your burn rate.
3. Add the time the next raise takes, plus a buffer. You will start raising again well before the bank balance reaches zero. The British Business Bank found that the median time between rounds for UK seed-stage companies lengthened from 12.4 months in 2024 to 14.4 months in 2025. In the US, the PitchBook-NVCA Venture Monitor (Q2 2026) reports that time between rounds has compressed, especially for AI companies, and warns that companies which raised at high prices need fast growth to raise again or risk a down round.
4. Check what it costs you. Raise too little and you are raising again before the milestones; raise too much at too high a price and the next round has a hard number to beat.

Illustration, not a benchmark: a company burns £70,000 a month. Its milestones need 15 months of work; it allows six months to raise the next round and three months of buffer. That is 24 months × £70,000 = £1.68 million, so it sets out to raise about £1.7 million.

Write down how the money splits between hiring, product and sales; investors will ask. Your stage shapes all of this: Funding rounds explained covers what pre-seed, seed and Series A money usually pays for, and Ways to fund a company compares equity with SAFEs, debt, grants and crowdfunding.

Step 2: Get ready: the story, deck, model and data room

Have four things ready before the first meeting.

• The story. In a few sentences: the problem, who has it, your answer, why now, why this team, what you have proved, and what this round gets you to.
• The pitch deck. Short, readable without you in the room, and in the order investors ask their questions. Our guide What a pitch has to answer takes those questions one by one.
• The financial model. Monthly for the period this round funds, with assumptions you can defend: prices, conversion, hiring dates, costs. An accounting firm can check the mechanics.
• The data room. Company records, cap table, contracts, intellectual property, accounts and customer evidence. Our data room readiness guide lists what investors ask for and the gaps that slow rounds down; virtual data room software and equity management software help keep it tidy.

Tidy the company as well: founder shares and vesting agreed, intellectual property assigned to the company by founders and contractors, the cap table matching the statutory registers, and every earlier SAFE, convertible or advance subscription listed with its terms.

UK: apply for SEIS or EIS advance assurance early

UK angels usually ask whether a round qualifies for the Seed Enterprise Investment Scheme (SEIS) or the Enterprise Investment Scheme (EIS). According to gov.uk (updated 6 April 2026), SEIS gives investors 50% income tax relief on up to £200,000 a year, and EIS gives 30% on up to £1 million, or £2 million if at least £1 million goes into knowledge-intensive companies. Investors must hold the shares for at least three years.

For the company, the SEIS rules cap the total at £250,000; the trade must not have been carried on for more than three years, and when the shares are issued the company must have gross assets of no more than £350,000 and fewer than 25 full-time equivalent employees. The shares must be "full risk ordinary shares" paid up in full in cash. Order matters: you cannot use SEIS once you have received EIS or venture capital trust investment. Under the EIS rules as updated on 6 April 2026, most companies can raise up to £10 million in any 12 months and £24 million in their lifetime, with gross assets of no more than £30 million before the issue and £35 million after.

Advance assurance is HMRC saying whether it agrees an investment would meet a scheme's conditions. You apply online with the amount sought, business plan, forecasts, latest accounts, articles, register of members and investor documents. It is a non-statutory service; HMRC's internal manual, for both SEIS and EIS, says it aims to answer most applications within 15 working days and complex ones within 40. Apply before outreach, so the answer is in hand when angels ask. Our listings for SEIS and EIS summarise both.

In the US, the nearest investor incentive is the federal exclusion for gains on qualified small business stock under Section 1202; for stock acquired after 4 July 2025, the cap on excluded gain per company rose to $15 million, according to the IRS. Whether your shares qualify is a question for a tax adviser.

Step 3: Build a target list of the right investors

Many rejections come from asking the wrong investor. Check every name against four filters:

• Stage. Do they invest at your stage, and do they lead rounds (set the terms and take the largest share) or only follow?
• Sector. Do they back your market, and do they already own a competitor?
• Cheque size. Does their usual cheque fit your round?
• Geography. Do they invest where you are based and incorporated? Some funds invest only in certain countries.

Our rankings of pre-seed investors, seed-stage investors, angel networks, venture capital firms and accelerators are a starting point. Trade bodies such as the UK Business Angels Association and, in the US, the Angel Capital Association represent angel groups. Before you pitch anyone, run through checking an investor: do they really write cheques at your stage, and how do they treat founders when things go wrong?

Keep a simple tracker: firm, partner, stage, typical cheque, who can introduce you, status and next step. Consider pitching your second tier first, so the pitch is sharp by the time you reach the first. Who to talk to when you raise covers the kinds of investor and adviser in more depth.

Step 4: Warm introductions and outreach

Venture investors find most deals through their networks. In a survey of 885 venture capitalists at 681 firms (Gompers, Gornall, Kaplan and Strebulaev, NBER, 2016), over 30% of deals came through professional networks, 20% were referred by other investors, 8% by portfolio companies and almost 30% were found by the investors themselves; only 10% came inbound from company management.

• Ask for introductions from people the investor trusts: founders they have backed, co-investors, lawyers, accountants and accelerator staff.
• Make it easy to forward. Send the introducer three or four lines about the company and the raise, plus the deck.
• Bunch your meetings. Running conversations in parallel over a few weeks keeps momentum and lets interest from one investor inform another.
• Be findable. Because investors also go looking, you can publish an anonymous raise on TrustList's Companies raising board; investors ask for an introduction and you decide who gets one. Publish a raise here.

The rules on who you may approach

UK. Section 21 of the Financial Services and Markets Act 2000 says a person must not, in the course of business, communicate an invitation or inducement to engage in investment activity unless they are authorised or the communication is approved by an authorised person. The Financial Promotion Order has exemptions, including for certified high net worth individuals (income of £100,000 or more, or net assets of £250,000 or more) and self-certified sophisticated investors; the current thresholds took effect on 27 March 2024. Ask a lawyer before sending your deck widely.

US. Under Regulation D's Rule 506(b) there is no general solicitation or advertising, and no more than 35 non-accredited investors in any 90 days, who must receive disclosure documents. Rule 506(c) allows general advertising, but every purchaser must be accredited and you must take reasonable steps to verify it. An individual is accredited with income over $200,000 ($300,000 with a spouse or partner) in each of the past two years, or net worth over $1 million excluding their main home. Check with your lawyer before mentioning the raise in public, including on a listing board.

Step 5: Meetings, and how investors decide

Expect a funnel. In the same survey, for each deal a firm closed it considered roughly 100 opportunities; one in four led to meeting management, a third of those reached a partner meeting, about half of those went on to due diligence and about a third of those received a term sheet. A single "no" is rarely a verdict on the company.

What investors weigh most is the team. Of the firms surveyed, 95% named the management team as an important factor and 47% as the most important; business model (83%), product (74%) and market (68%) followed as important factors.

A typical sequence runs: a first call, a deeper meeting on product and numbers, a partner meeting, due diligence and a term sheet. Angels investing alone can move faster; angel groups typically add a screening step and a pitch session. In every meeting:

• Reach the evidence quickly and know your numbers by heart.
• Ask about their process: who decides, what happens next, how long it takes and whether they lead.
• Follow up within a day with anything you promised.
• Turn a "maybe" into a question: what would you need to see to say yes?
• Send short progress updates to everyone still in play.

Step 6: Term sheets and negotiation

A term sheet sets out the main terms before lawyers draft the full documents. Most of it is normally not binding; clauses such as exclusivity, confidentiality and costs often are, so read which is which. The terms that matter most:

• Round size and valuation, pre-money and post-money.
• The instrument. Priced shares, a SAFE (in the US, Y Combinator's post-money SAFE has been its standard since 2018) or, in the UK, an advance subscription agreement. If SEIS or EIS matters, HMRC's manual expects an advance subscription agreement to allow no refund, carry no interest, be impossible to vary, cancel or assign, and set a long-stop date for issuing the shares, normally no more than six months away.
• Liquidation preference: who gets paid first on a sale, and how much.
• Option pool: its size, and whether it is created before the investment (diluting only existing shareholders).
• Board and consents: seats, and the decisions investors can veto.
• Other rights: pro-rata rights in later rounds, anti-dilution protection, founder vesting and leaver terms, information rights.

Competing interest is the strongest lever you have. Terms that compound, such as preferences and control, usually matter more than a small difference in headline valuation. Compare what you are offered with the published model documents, and have a lawyer who does venture deals review it.

Worked example: how an option pool changes the price (illustration)

Two founders own all 8,000,000 shares. An investor offers £1.5 million at a £6 million pre-money valuation, so £7.5 million post-money, and asks for a 10% unallocated option pool counted in the pre-money.

• The investor's 20% is 2,285,714 new shares at about £0.656 each.
• The pool is 10% of the enlarged company: 1,142,857 shares.
• The founders hold 70%. Without the pool they would hold 80%.

Because the pool comes out of the pre-money, its whole cost falls on the founders: their 8,000,000 shares are worth £5.25 million at the round price, not £6 million. That is the effective pre-money valuation, and the number to negotiate.

Step 7: Due diligence

In the NBER survey, early-stage firms spent 81 hours on due diligence on average and called 8 references; later-stage firms spent 184 hours and called 13. Expect checks on:

• company records, share capital and the cap table;
• intellectual property ownership and any open-source or licensing issues;
• key contracts, customers (often by phone) and suppliers;
• employment terms, founder backgrounds and references;
• financial records, tax (including SEIS or EIS status) and data protection.

Our due diligence hub sets out what a thorough review looks like. A prepared data room shortens this stage. Name one person to answer questions and disclose problems early: they will surface in the warranties anyway. Due diligence runs both ways, so take references on your lead investor from founders they have backed, including ones whose companies struggled.

Step 8: Legal documents and closing

US. The NVCA publishes model legal documents for venture financings: certificate of incorporation, stock purchase agreement, investors' rights agreement, voting agreement, and right of first refusal and co-sale agreement. SAFE rounds use the short SAFE, with an optional pro-rata side letter; Y Combinator also publishes versions for Canada, the Cayman Islands and Singapore and advises taking local legal advice.

UK. UK Private Capital, formerly the BVCA, publishes model documents (articles, shareholders' agreement, subscription agreement and a summary of terms, February 2025 edition) drafted for Series A and described as not suitable for seed investment, so ask your lawyer what a seed round needs.

Closing then follows a sequence:

1. Board and shareholder approvals, such as adopting new articles and the authority to issue shares.
2. Signing, receipt of funds, and the issue of shares or signing of SAFEs; update the registers and cap table.
3. UK filings. Deliver a return of allotment (form SH01) to Companies House within one month of allotting the shares. For SEIS, submit the compliance statement (form SEIS1) once the company has traded for four months or spent at least 70% of the money; this leads to the SEIS3 certificates investors use to claim relief. The EIS compliance statement follows four months of trading.
4. US filings. File Form D with the SEC within 15 days after the first sale; states may require their own notice filings and fees.
5. Thank the investors who passed, and send your first update to the new ones.

How long it realistically takes

Stage	What sets the pace	Sourced timing
SEIS or EIS advance assurance (UK)	HMRC	Most within 15 working days, complex ones within 40 (HMRC manual)
A venture firm's deal process, to close	The investor	83 days on average; 73 for early-stage firms (NBER survey, 2016)
Form D (US)	You	Within 15 days after the first sale (SEC)
Return of allotment (UK)	You	Within one month of allotment (Companies Act 2006, s555)
Next round	The market	UK seed median 14.4 months between rounds in 2025 (British Business Bank)

The investor's process is only part of it. Add preparation before and legal work after, and a first round takes months, not weeks. Start while you have enough cash to walk away from a bad offer.

Raising outside the UK and US? Our country guides cover India, Pakistan, the UAE and Saudi Arabia, alongside the UK and the US.

Checklist: raising a round from start to close

Before you start

• Milestones this round must reach, costed month by month.
• Round size covering the milestones, the next raise and a buffer.
• Founder shares, vesting and IP assignments in order.

Getting ready

• A story you can tell in a few sentences.
• Pitch deck, financial model and data room complete.
• UK: SEIS or EIS advance assurance applied for.
• Financial promotion (UK) or Regulation D route (US) agreed with a lawyer.

Finding investors

• Target list filtered by stage, sector, cheque size and geography.
• Each investor checked; an introducer found for each.
• Meetings bunched into a few weeks.

Meetings and terms

• Term sheet read for binding clauses, preference, pool, board and consents.
• Effective pre-money valuation worked out.

Diligence and closing

• One owner for diligence questions; references taken on the lead investor.
• Documents signed, money received, shares or SAFEs issued, registers updated.
• UK: SH01 within one month; compliance statement after four months' trading. US: Form D within 15 days.
• First investor update sent.

About this guide

This guide is general information, not financial, legal or tax advice. TrustList does not arrange or advise on investments. Rules and figures were checked against the linked sources on 26 September 2026; take professional advice before you raise.