Fundraising FAQ
SAFEs, convertible notes, dilution, valuation caps, and what investors look for at every stage of your startup.
When is the right time to raise funding?
Raise when you have evidence of product-market fit — paying customers, strong engagement, or rapid growth — and a clear plan for how capital will accelerate your trajectory. Ideally, raise when you do not need to, as this gives you negotiating leverage. Check your readiness with the fundraising readiness calculator.
How much should I raise in a seed round?
Raise enough to reach your next meaningful milestone with 18-24 months of runway. In 2026, median seed rounds are $2-4 million, but the right amount depends on your burn rate, growth plan, and target milestones. Raising too little means another round too soon; too much means excessive equity dilution.
What is a SAFE?
A SAFE (Simple Agreement for Future Equity) is a fundraising instrument created by Y Combinator. Investors give you cash now in exchange for the right to receive equity later, typically at a priced round. SAFEs have no interest rate or maturity date, making them simpler than convertible notes. Read the full SAFE vs convertible note comparison.
What is a convertible note?
A convertible note is a short-term loan that converts into equity at a future priced round. Unlike SAFEs, convertible notes carry an interest rate (typically 2-8%) and a maturity date (12-24 months). If the note matures before conversion, the company must repay or negotiate. Compare terms using the SAFE and note calculator.
What is the difference between a SAFE and a convertible note?
SAFEs are simpler: no interest, no maturity date, and fewer legal costs. Convertible notes are debt with interest and a maturity deadline. SAFEs are founder-friendly because there is no repayment obligation. Notes give investors slightly more protection. Read the detailed SAFE vs convertible note guide and model scenarios with the calculator.
What is a valuation cap?
A valuation cap is the maximum valuation at which a SAFE or convertible note converts into equity. It protects early investors by ensuring they receive a better price if valuation increases significantly. Lower caps give investors more equity; higher caps preserve founder ownership. Model different caps with the equity dilution calculator.
What is equity dilution?
Equity dilution occurs when a company issues new shares, reducing existing shareholders' percentage ownership. Every funding round, option pool increase, or SAFE conversion dilutes founders. While dilution is normal, understanding the math helps you negotiate better. Read the startup equity dilution guide and model scenarios with the dilution calculator.
How much dilution is normal at each funding stage?
Typical dilution per round: Pre-seed 10-15%, Seed 15-25%, Series A 20-30%, Series B 15-25%. Including option pools, founders often retain 50-60% after seed and 25-35% after Series A. Plan across multiple rounds with the equity dilution calculator. See dilution benchmarks by stage.
What do investors look for in a seed-stage startup?
Seed investors focus on team strength, market size, initial traction (waitlist, LOIs, or early revenue), product vision, and capital efficiency. They want founders who deeply understand the problem. Metrics matter less than narrative at seed, but showing data strengthens your case. Read about financial milestones by stage.
What metrics do Series A investors expect?
Series A investors typically want $1-2M ARR, strong month-over-month growth (15-20%+), healthy unit economics (LTV:CAC above 3:1), low churn (under 5% monthly), and a clear path to scalability. They also evaluate burn multiple and stage-appropriate benchmarks. Build your data room with financial projections for investors.
How long does fundraising typically take?
Fundraising takes 3-6 months from first outreach to money in the bank. Pre-seed and seed rounds can close faster (4-8 weeks) with SAFEs. Series A rounds typically take 3-4 months due to diligence. Start 6-9 months before you need capital. Check your timeline with the fundraising readiness calculator.
What is a pre-money vs post-money valuation?
Pre-money valuation is what your company is worth before new investment. Post-money valuation equals pre-money plus the investment amount. If your pre-money is $8M and an investor puts in $2M, post-money is $10M and the investor owns 20%. Model different scenarios with the business valuation calculator.
What is an option pool and how does it affect founders?
An option pool is a block of shares reserved for future employee stock options, typically 10-20% of the company. Investors often require the pool be created from pre-money valuation, meaning founders bear the dilution. A larger pool means more founder dilution but more equity to attract talent. Model the impact with the equity dilution calculator.
What is pro-rata rights?
Pro-rata rights give existing investors the right to invest in future rounds to maintain their ownership percentage. If an investor owns 10% and you raise a new round, pro-rata lets them invest enough to keep 10%. It is a standard term that rewards early backers. Learn how this affects your cap table and dilution.
How do I create financial projections for investors?
Build a 3-year model with monthly granularity for year 1 and quarterly for years 2-3. Include revenue, expenses, headcount, unit economics, and cash flow. Show your assumptions clearly. Investors know projections are wrong — they want to see you understand your drivers. Read the full guide on financial projections for investors.
What is a board deck?
A board deck is a regular presentation (monthly or quarterly) that updates investors and board members on company performance. It typically covers key metrics, financials, product updates, team changes, risks, and asks. A strong board deck builds investor trust. Build yours with metrics from an investor-ready financial dashboard.
What is a cap table?
A cap table (capitalization table) tracks who owns what percentage of your company — founders, investors, employees with options, and any other shareholders. It is updated after every funding round, option grant, or equity event. Keeping an accurate cap table is essential. Model future rounds with the equity dilution calculator.
How do multiple SAFEs stack and convert?
When multiple SAFEs convert at a priced round, each converts independently based on its own valuation cap and discount. Post-money SAFEs are clearer: each investor gets a fixed percentage. Pre-money SAFEs can create unexpected dilution when they stack. Model the math with the SAFE and note calculator and read the SAFE guide.
Check your fundraising readiness
Score your startup across the metrics that matter to investors and identify gaps before you pitch.