Capital Raising Strategies: Which Money to Raise, Who From and How to Run the Raise

A capital raising strategy is the plan behind a raise: which kind of money a business takes, how much, who it comes from, on what terms, how the founder reaches those investors or lenders, and which rules the raise runs under. Most of those decisions are made by the facts of the business, such as its revenue, its assets, how big it could grow and where it and its investors are based.

Key takeaways

• The facts of the business decide which kind of money fits it.
• The amount comes from the plan and the next milestone.
• Investors are matched on sector, stage, cheque size, location and debt or equity, and a raise needs hundreds of approaches.
• In the US, the exemption a company raises under decides whether it can approach investors it doesn’t already know.

What a Capital Raising Strategy Covers

Each decision in a raise changes who will look at it. A business that asks for the wrong kind of money, or the wrong amount, or asks people who never back deals like it, gets turned down by investors who might have backed it on different terms.

Strategies for raising capital work best when these are settled in order, because each one narrows the next. The kind of money decides which investors are worth approaching, and the amount and structure decide which of them can take part.

Matching the Money to the Business

Equity is money in exchange for shares, with nothing to repay. Debt is money borrowed and paid back with interest, usually against security. For many businesses the choice between them is made by the facts. A business with no revenue and nothing a lender could take security over can’t borrow, so equity is the money available to it. A business with steady profits and property it owns can borrow against both and keep all its shares.

The table shows the money that tends to fit each kind of business and what the funder looks at before they put it in.

How equity works in detail, from the valuation to the rights investors take with their shares, is covered in equity financing. For UK businesses that want to borrow, Funding Guru arranges business loans.

The Main Capital Raising Strategies

These are the routes founders raise through, sometimes called capital raising techniques. Many raises use more than one, such as friends and family first and angels after, or a loan alongside an equity round.

Raising From People You Already Know

Friends, family, customers, suppliers and the founder’s own network are often the first money in. On a small raise they can be all of it. On a bigger one, money from people who know the founder shows later investors that others already believe in the business.

Some of a founder’s existing contacts are already serious investors without the founder knowing it, so the first list is worth checking properly. The investor search I built for raising capital for businesses can check a founder’s own LinkedIn, email and phone contacts and show which of them invest. In the US, these are also the people a company can approach under Rule 506(b) without breaking its ban on general solicitation, covered in the rules section below.

Angel Investors and Syndicates

Angel investors are individuals investing their own money, usually early and usually in a sector they understand. Many bring contacts and experience with the cheque. Angel syndicates and networks are groups of angels who follow a lead investor or review deals together, so one application or one relationship can lead to several cheques. Who they are and how founders reach them is covered in finding an angel investor.

Venture Capital and Accelerators

Venture capital funds invest other people’s money and have to return several times what they raised within a fixed life. They expect many of their investments to fail, so they only back businesses that could become very large. A good business that will grow steadily but never become huge isn’t a venture capital deal, however well it’s pitched. The difference from angels is set out in angel investors and venture capitalists.

Accelerators invest a small amount early, usually for a fixed percentage or on a SAFE, and run a programme alongside it. For a startup fundraising strategy at the very first stage, pre-seed funding covers who invests and what they need to see.

Equity Crowdfunding

Equity crowdfunding sells shares to many small investors through an online platform. It suits consumer brands with customers who’d like to own a piece of the business, because those customers become the first investors in the campaign. The platform changes how the founder reaches investors, not the documents the raise needs. In the US, companies use Regulation Crowdfunding, which allows up to $5 million in 12 months through an SEC-registered platform. How a campaign runs and what it costs is in equity crowdfunding.

Private Equity, Family Offices and Corporate Investors

Private equity buys into established, profitable businesses it can grow and sell for substantially more. Many of its deals are minority stakes, where the firm buys less than half the shares and the founder keeps control. Family offices invest a wealthy family’s money, as debt or equity, in businesses the family understands. Corporate investors are larger companies investing in smaller ones that could give them a new product, market or group of customers. How private equity differs from venture capital is in private equity vs venture capital.

Borrowing From Lenders

Banks, specialist lenders, private lenders and private credit funds lend money that’s repaid with interest. The lender doesn’t own any of the business, but it needs to see how the loan will be repaid and usually wants security, something it can sell to get its money back if the loan isn’t repaid.

Every funder, lender or investor, wants 5 answers: how much, what it’s for, how it will be repaid, when, and what happens if it goes wrong. A loan application that answers all 5 gets a faster decision.

Combining Debt and Equity

Many raises use both, layered into what’s called a capital stack. Each lender lends against what it can take security over, and equity fills the rest. A business expanding into a second site might borrow against the new equipment, take a loan against its own cash flow and raise equity for the fit-out and the first months of running costs. The Capital Stack System sets out how the layers fit together.

How Much to Raise and When to Start

The amount is built from what the money will pay for between now and the next milestone, such as a finished product, a first major contract or a set level of revenue. On top go runway, enough cash to keep going while the business raises again or starts to fund itself, and contingency, a margin in case things take longer or cost more. How to cost each part is covered in how much to raise.

Many businesses raise in stages, one milestone at a time, because reaching a milestone proves something and can make the business worth more next time. For some, the next stage is never needing to raise again.

Raising too little is the bigger danger. The money runs out before the milestone, and the founder has to raise again without the progress the first money was meant to buy.

Timing follows from the same numbers. A founder with little cash left has less room to turn down poor terms, so the raise starts while there’s still enough money in the bank to say no.

Structuring the Deal

The structure is how the money goes in, and it’s settled before investors are approached so they know exactly what deal they’re looking at. Each of the structures below, and what it means for the founder’s shares, is explained in the Capital Catalyst training course of Matt Haycox, which is free to join.

A priced equity round. The founder sets the valuation and justifies it. The investor subscribes for new shares at that price, and their share of the business is the amount they invest divided by the post-money valuation, which is the pre-money valuation plus the new money. In a round with several investors, one usually leads: they negotiate the terms in the term sheet, and the others follow on the same terms.

A SAFE. A simple agreement for future equity, created at Y Combinator in 2013. The investor pays now and gets shares at the next priced round, usually with a valuation cap or a discount for going first. It exists because an early business is hard to value, and a SAFE leaves the price to a later round. It’s widely used by US startups.

A convertible loan note. A loan that turns into shares at the next round. It’s debt until it converts, usually with interest and a repayment date if it doesn’t. How the discount and cap work is covered in convertible loan note.

An advance subscription agreement. The UK’s version of the same idea. It keeps SEIS and EIS tax relief available for UK investors, which a standard SAFE doesn’t. More in advance subscription agreement.

A loan. The amount, the interest, the repayment schedule and the security, agreed with the lender.

Finding and Approaching Investors

Every investor backs particular sectors, stages, cheque sizes and countries, and only debt or only equity. An investor who fits on all of those reads the deck. One who doesn’t won’t invest, however good the business is.

Building the Investor List

A list of venture capital funds found online is mostly investors who’ll never back the business: they write a different size of cheque, back a different sector or only invest in their own country. The list starts from the deal instead, with the kinds of money that fit it, then the people and firms who provide that money for deals of this size, sector and location.

Capital Raiser, the investor search I built and use for my own raises, works this way. It starts from the deal and matches investors, lenders, angel networks and platforms to it, with the reasons each one fits.

The list needs to be long. Even investors who fit the deal exactly mostly won’t reply to someone they don’t know, so a raise means approaching hundreds of matched investors, not dozens.

Warm Introductions and Direct Approaches

A warm introduction comes from someone the investor already knows and trusts. For every name on the list, the first question is whether anyone the founder knows can make the introduction: an existing investor, an adviser, the company’s lawyer or accountant, another founder.

Direct approaches go to everyone else. They work when they’re written for that investor: a deal they’ve done, a sector they back, the cheque size that fits, and a short, specific ask for a meeting. In the US, approaching investors the company has no relationship with can count as general solicitation, which decides the exemption it has to use.

Running the Outreach

Approaching several investors at the same time keeps a raise moving. Waiting for each answer before trying the next name can take weeks per investor, and with only one interested party the conversation drifts towards their terms.

Many raises go out in waves. The first goes to the best-matched investors, and anything their replies show up in the deck or the pitch is fixed before the second. That’s how raises run on Capital Concierge of Matt Haycox: the investor list is ready in week 1, the first wave goes out on day 30, and every approach is signed off before an investor sees it.

Every reply is tracked in one pipeline, from not contacted to invested, and every follow-up goes on time. Investors who say yes are a guide to who else to approach, because others with the same profile are likely to back the same deal. The F.U.N.D.S. Method sets out the whole process I use, from the foundation of the business to the deal terms.

Capital Raising Rules by Country

Offering shares in a private company is regulated almost everywhere, usually with exemptions for investors wealthy or experienced enough to judge the risk. The exemption a company uses decides who it can sell to and how it’s allowed to find them, so it’s part of the strategy, not paperwork at the end.

United States

Most private raises in the US happen under Regulation D, which has 2 main routes under Rule 506.

Rule 506(b). A company can raise an unlimited amount from an unlimited number of accredited investors, plus up to 35 non-accredited investors in any 90 days who have enough financial knowledge and experience to judge the investment. It can’t use general solicitation or advertising to market the shares. That suits a raise from people the founders, their investors and their advisers already have a relationship with. If non-accredited investors take part, they must be given disclosure documents and financial statements.

Rule 506(c). A company can advertise the raise and approach investors openly, as long as every buyer is accredited and the company takes reasonable steps to verify it. That suits a raise that relies on approaching investors the founders don’t know. In March 2025, SEC staff accepted a minimum investment of $200,000 for individuals, or $1 million for companies, with written confirmation from the investor, as reasonable steps. That works for large cheques. Smaller angel cheques still need other checks, such as a letter from the investor’s accountant or lawyer.

Accredited investors. An individual qualifies with a net worth over $1 million, not counting their main home, or income over $200,000, or $300,000 with a spouse or partner, in each of the last 2 years.

Under both routes, the company files Form D with the SEC within 15 days of the first sale.

Regulation Crowdfunding. Up to $5 million in 12 months, online, through an SEC-registered broker-dealer or funding portal, with limits on how much non-accredited investors can put in.

Regulation A. Up to $20 million in 12 months under Tier 1, or $75 million under Tier 2, and open to non-accredited investors, with more disclosure. It’s the route closest to a small public offering.

UK, Australia, Singapore and the UAE

In the UK, section 21 of the Financial Services and Markets Act 2000 stops anyone inviting people to invest in the course of business unless an authorised firm makes or approves the invitation. Exemptions cover high net worth and sophisticated investors who sign a statement confirming they meet set tests. The Seed Enterprise Investment Scheme and the Enterprise Investment Scheme give UK taxpayers income tax relief on qualifying shares, so a company that qualifies can offer investors more than the shares alone.

In Australia, a company doesn’t need to give a prospectus to investors a qualified accountant certifies as having net assets of at least A$2.5m, or gross income of A$250,000 a year for each of the previous 2 years.

In Singapore, offers to accredited investors are exempt from the prospectus rules, and one way an individual qualifies is with net personal assets over S$2m, with no more than S$1m of that coming from their home.

In the UAE, the rules depend on where the company is set up. In the Dubai International Financial Centre, the Dubai Financial Services Authority licenses crowdfunding platforms through which investors can buy into businesses. More detail on each country is in how to raise capital for a business.

Example of a Capital Raising Strategy

Say a US company sells booking software to restaurants. It has $60,000 of monthly recurring revenue, it’s growing, and the founders want to reach $150,000 a month.

The kind of money. It owns no property or equipment a lender would take as security, and the plan is fast growth, so the money is equity.

The amount. A sales team and 2 engineers cost $80,000 a month, and the founders expect it to take 15 months to reach the milestone: $1.2 million. Marketing over the same period is $150,000, and runway and contingency are another $150,000. The raise is $1.5 million.

Who from. Angels and seed funds that back software for restaurants or hospitality, at this stage, in the US, writing cheques that fit a $1.5 million round. Some of those cheques will be $25,000 and some $250,000 or more.

The structure. The founders choose a SAFE with a $10 million valuation cap, because investors are ready to commit now and a priced round would mean agreeing a valuation and full legal documents for a round this size. On a post-money SAFE, $1.5 million on a $10 million cap converts into 15% of the company before the next round’s new shares.

Reaching investors. Existing contacts and warm routes first, then direct approaches to several hundred matched investors, in waves, with every reply tracked.

The rules. Because most of those investors don’t know the founders, the company raises under Rule 506(c) and verifies every investor as accredited. The $200,000 minimum route covers the larger cheques. The $25,000 angels are verified with a letter from their accountant or lawyer.

Any change in the facts changes the strategy. If the same company owned the restaurants’ booking hardware and leased it to them, part of the money could come from a lender secured on the hardware, and the equity raise would be smaller.

Where a Capital Raising Strategy Goes Wrong

The money doesn’t fit the business. A steady, profitable business pitches venture capital funds that only back businesses that could become very large, or a business with no way to repay a loan applies to lenders.

The investor list is short or badly matched. The deck goes to whichever investors the founder could find, and most of them never back that sector, stage, cheque size or country.

Investors are approached one at a time. Each answer takes weeks, interest goes cold, and the one investor still talking sets the terms.

The amount doesn’t reach a milestone. The money runs out before the business has proved what it set out to prove, and the next raise starts from a weaker position.

The outreach breaks the exemption’s rules. In the US, a company raising under Rule 506(b) that advertises the raise, or approaches investors it has no relationship with, has used general solicitation that route doesn’t allow.

The raise never properly starts. The founder keeps preparing, waits for a better moment or never approaches investors, and money that was available never gets asked for.

FAQs About Capital Raising Strategies

What is a capital raise?

A capital raise is one funding round in which a business brings in outside money, by selling new shares, borrowing or both, on terms agreed with the investors or lenders. The capital raising strategy is the set of decisions behind it: which money, how much, from whom and how. The basics are covered in how to raise capital for a business.

What is the best way to raise capital for a business?

There’s no single best way to raise capital; it depends on the business’s revenue, assets, growth potential and the amount it needs. Equity tends to fit early businesses that could grow fast and have nothing to lend against. Borrowing tends to fit businesses with steady cash flow or assets a lender can take as security.

How many investors should you contact when raising capital?

Hundreds, not dozens. Even investors who fit a deal exactly mostly won’t reply to someone they don’t know, so the list needs to be both well matched and long, approached in waves with every reply tracked.

Can you advertise a capital raise in the US?

Yes, under Rule 506(c), Regulation Crowdfunding or Regulation A, each with its own conditions. Under Rule 506(c), every investor must be accredited and verified. Under Rule 506(b), a company can’t use general solicitation or advertising to market the shares.

How do startups raise capital?

Startups usually raise first from the founders’ own network, angels, accelerators and pre-seed funds, often on a SAFE in the US or an advance subscription agreement in the UK. Once they have traction, such as paying customers and a growth rate, they raise from seed and Series A funds in priced rounds.

This explains how capital raising generally works. It isn’t legal, tax or investment advice, and a lawyer should check how a raise is offered before any investor is approached.