Raising money is one of the hardest things a founder does. Understanding the startup funding stages — and what investors expect at each — makes the journey far less daunting. Here is how funding works from pre-seed to Series B, and how to decide between debt and equity.
The funding stages
- Pre-seed funding — the earliest capital, often from founders, friends, family and angels. It funds building a prototype and proving early demand. SEIS is commonly used here.
- Seed funding — your first significant round, typically from angels and early-stage VCs, to find product-market fit and build a small team. EIS often applies at this stage.
- Series A — institutional VC money to scale a proven model: growing revenue, expanding the team, and refining go-to-market.
- Series B — larger funding to scale aggressively — new markets, bigger teams, and sometimes acquisitions. Investors expect strong metrics and a clear path to profitability.
What is seed funding really for?
Seed capital buys you time to reach the milestones that unlock the next round. Investors at seed are backing the team and the early traction more than the financials. Be clear about how much runway the money buys and what it will prove.
Debt vs equity
The fundamental choice in any raise:
- Equity means selling shares. You don't repay it, but you give up ownership and control, and it is expensive if the company succeeds.
- Debt (bank loans, venture debt, the Recovery Loan Scheme) keeps your equity intact, but must be repaid with interest and usually needs cash flow or security.
Many founders use a blend — for example equity at seed and venture debt later to extend runway without dilution. Convertible loan notes and SAFEs sit in between, starting as debt and converting to equity at a later round.
How to prepare to raise
Investors will scrutinise your financial model, cap table, and unit economics. Before you raise you should have:
- A credible financial forecast and clear use of funds;
- Clean accounts and a tidy cap table;
- SEIS/EIS advance assurance in place if relevant;
- Realistic metrics and a compelling narrative.
How PushDigits can help
We build investor-ready financial models, run cash-flow forecasts, prepare SEIS/EIS advance assurance, and support founders through due diligence. See our Business Advisory service or book a consultation.