Founder Fundamentals EP 08: Raising Capital and Pitching to Investors

In the latest edition of YSpace’s Founder Fundamentals Winter 2025 series, entrepreneurs and startup founders were able to learn about how to prepare early-stage startups to raise equity capital from Gaurav Bansal of AMG Venture Partners. For pre-seed and seed-stage startups, building a robust fundraising strategy is critical to securing capital and establishing long-term investor relationships.

Understanding the Venture Capital Landscape

Equity investors operate with clear return expectations. Venture capitalists and angel investors typically seek a 50x–100x return within 7–10 years for early-stage investments. This translates into a requirement for startups to demonstrate the potential to scale to $50–$100 million in revenue during that period.

Fund managers, who are accountable to Limited Partners (LPs), assess startups through this lens. With a limited number of investment slots per year, and thousands of decks reviewed, the decision to schedule a first call is often made within two minutes. Founders are expected to stand out quickly by signaling strong team capabilities, scalable business models, and market potential.

Investor Screening and Components of an Investor Kit

Raising capital requires more than a compelling pitch—it demands that founders demonstrate clear business readiness across several critical areas. Investors assess factors such as the strength and relevance of the founding team, the urgency of the problem being addressed, and the size of the market opportunity. They also look for clear signs of validation, a scalable business model, and a distinct value proposition. A realistic growth roadmap, with well-defined milestones and revenue targets, further strengthens a startup’s case for funding. Throughout this process, clarity and consistency across materials are essential, as discrepancies in messaging, market assumptions, or financial logic can quickly raise red flags.

Alongside strategic positioning, operational readiness is reflected in a comprehensive investor kit. This typically includes short and long-form pitch decks, a practiced verbal pitch, responses to common investor questions, and a detailed financial model that illustrates the path to scale. Founders must also be equipped to articulate their funding ask, projected runway, valuation rationale, and expected dilution. Legal preparedness is equally important—understanding the structure and implications of SAFEs, convertible notes, and equity rounds is essential, as is the ability to navigate term sheets and avoid potentially harmful clauses such as MFN rights or aggressive liquidation preferences.

Approaching the Investor Funnel

Investor outreach is a structured process that benefits from strategic planning. Founders must first define their business stage and identify investors who align by geography, sector, cheque size, and thesis. Outreach begins with a carefully crafted shareable email that succinctly communicates the core business proposition and includes a pitch deck and calendar link. These materials must be concise and intentional.

While angel investors may be swayed by a compelling story or personal connection, institutional venture capital firms apply more extensive criteria. A successful early-stage fundraise requires recognition that being angel-fundable is not equivalent to being VC-fundable. Both groups serve valuable roles in the ecosystem, but each maintains distinct expectations.

Timing and Capital Strategy

Founders are advised to begin preparing for a fundraise at least 12 months before anticipated cash depletion. A typical fundraise can take four to six months from start to close, and raising for a 24-month runway is considered a best practice. Over-dilution is a common concern; it is recommended that founders limit equity dilution to no more than 20% per round, ensuring that they retain meaningful ownership across successive rounds. Capital strategy also involves calculating realistic business KPIs that the round will help achieve. Rather than arbitrarily selecting a round size, startups are expected to understand how capital inflows will support customer acquisition, hiring, product development, and milestone attainment.

Common Red Flags That Kill Investor Interest

Certain red flags can immediately hinder investor interest. These include

• Part-time founding teams
• Low founder equity
• Overcomplicated corporate structures
• Weak customer validation.
• Misaligned messaging across online platforms

"From an investor’s lens, founders only have a few moments to make the case that their startup is worth a closer look. Precision, clarity, and traction are what drive the second meeting." – Gaurav Bansal

Final Takeaway

Fundraising readiness is not simply about preparing a pitch deck or reaching out to investors. It requires a methodical approach to business planning, financial modeling, legal understanding, and strategic communication. Startups that take the time to build a comprehensive investor kit and align with the right investor profiles are better positioned to navigate the capital-raising process with clarity, confidence, and integrity.

About Founder Fundamentals

Founder Fundamentals is a 12-week workshop series by YSpace and Markham Small Business Centre (MSBC), designed to equip you with essential entrepreneurial skills like business planning, bootstrapping, and Shopify setup. Attend 9+ workshops to earn a Certificate of Recognition and take the first step toward entrepreneurial success!