How to Raise Capital for a US Startup: Top Tips for Funding Your New Business

The best ideas go nowhere without the resources to fund them. According to the Chamber of Commerce, 18% of new businesses fail in the first year. This is due to a lack of funding.¹ That makes raising capital one of your top priorities. This article will explain how to do that, starting with how you present your idea to potential investors.

Some key takeaways:

• Write your business plan before creating a pitch deck. The US Small Business Association has guidelines and templates to help with this.

• An effective pitch deck should be 10-15 slides, long enough to present your ideas but not overwhelming to potential investors.

• Key characteristics you’ll want in an investor include industry experience, a history of investing in similar-sized companies, and sufficient funds.

How to Successfully Raise Money for a Startup: Step-by-Step

Let’s start with your idea. Does it resonate with others? New entrepreneurs often think their ideas are new, but someone else could have tried it already. Bounce your thoughts off others, preferably professionals who know how business works. You’ll also want to do some competitive research into what else is being done. No one wants to reinvent the wheel.

Write your business plan before you create a pitch deck. The US Small Business Administration has guidelines and templates that can be helpful with this.² Follow them carefully. This is because your pitch deck will incorporate the business plan. Serious investors will ask difficult questions, so these preparation steps are critical to your success.

Preparing a Compelling Pitch Deck

An effective pitch deck should be long enough to present your ideas but not overwhelming to potential investors. The ideal number of slides is 10-15 to summarize your business vision. Fewer slides won’t get your point across. Too many will lose your audience. Finding the right balance is the tricky part. The pitch deck’s key components should include:

• A clear problem statement: Every new business needs to solve a problem. That’s how you estimate demand for your product or service. Your pitch deck should present this in a way that resonates with investors.

• Your unique solution: Most industries already have companies doing what you’re trying to do. Your solution is what differentiates you from your competitors. This is part of your value proposition, so state it clearly.

• Market analysis: Breaking into a new market with no competitors, is the ideal scenario for a new business. This is called blue ocean, but it’s rare.³ A thorough market analysis will show the significance of your opportunity.

• Business model: Your business model should be part of your business plan, so this slide will be easy to construct. Ensure you demonstrate your path to profitability, and be prepared to answer questions about return on investment (ROI).

• Competitive landscape: This slide combines the market analysis and the business model. It should show who is operating in your space and what competitive advantages you have over them.

• Traction metrics and milestones: Small businesses grow in stages. The metrics and milestones slide shows how you’ll measure growth at each stage. It also shows the timelines investors can use to evaluate their investments.

• Team qualifications: Pitch decks all look the same to VCs and investors. The slide that highlights relevant experience separates them. You and your team could be the deciding factor for whether they invest.

• Financial projections: Use realistic growth assumptions. Seasoned investors will see right through overinflated numbers. Do the math several times and use hypothetical “worst case” and “best case” scenarios to ensure accuracy.

• Funding request: Your funding request should be specific and include a breakdown of how the money will be used. It’s imperative to state this clearly. Any uncertainty when asking for money will be perceived as a weakness.

Identifying the Right Investors

The “right” investors should be a good match for your business. That means they add something to your operation, not simply put money in and expect a return on their investment. “Hands-off” investors are good because they allow you to run your team independently, but they’re often more of a burden than an asset. In the early stages, you want more.

Don’t misinterpret this. A hands-off investor in the retail world allows their money to be managed without changing their portfolio. In the business world, it means they won’t try to manage your company. That’s good, but you don’t want someone who won’t offer input or participate in financial planning. Key characteristics you’re looking for include:

• Industry Experience: Your industry operates differently than other industries. It’s important to find investors who’ve worked in your space before. This way, they bring the most to the table, especially if this is a first-time business venture for you.

• Investment History: Investors who typically invest in companies at your stage are more familiar with the challenges you’ll face at each stage. Their experience can be invaluable as you grow and scale your operations.

• Investment Amount: Early-stage investors can often be reapproached for more funds in later fundraising rounds. This is provided they have the money. Vet them thoroughly at the outset to see who can be counted on as a long-term partner.

• Strategic Value: Capital doesn’t always come in dollars and cents. There’s strategic value to partnering with investors who offer connections to key manufacturers, suppliers, or other investors who can provide additional funds.

Begin the vetting process by creating a potential investor list broken down by ideal fit. The best choices should check all the boxes listed above. Use your existing network to ask for warm introductions. Cold outreach rarely works when you’re raising funds. You can also make connections at industry events, startup competitions, and accelerator programs.

Mindset is a key factor in this process. Showing desperation because you “need the money” is the worst thing you can do in a fundraising round. Your stance should be that your company is a valuable asset everyone wants. It’s their privilege to invest in your company. Treat your situation like that, and it will improve your chances of acquiring the funds you need.

Negotiating Terms and Conditions

Harvard Law School published an article last year that explores the origins and history of investment contracts.⁴ It emphasizes how the term originated with the public, not the government. An investment contract was originally intended to be a “quid pro quo” agreement between two parties. Both must have something to offer.

Once you've attracted investor interest, you'll need to negotiate terms that work for both parties. At this stage, you should have a general overview of what that looks like on your side, but your investors will want to negotiate. You can prepare for that by deciding how far you’re willing to go on what will likely be the points of contention. Key considerations include:

• Valuation: Early-stage companies typically use fair market valuation to set a price for their company, but it’s easy to dispute. The SEC requires a 409A valuation from an independent source if you’re going public or issuing employee stock options.⁵

• Equity: Once you know what your shares are worth, you can offer dollar-for-dollar value to an investor. You’ll need to create a cap table to ensure you don’t dilute ownership to the point where someone else controls your company.

• Control Provisions: Common stock comes with voting privileges. Preferred stock does not. Many companies issue a mix of common and preferred stock to investors to retain greater decision-making powers. This could be a key negotiating point.

• Exit Strategy: This is the most fluid point in the negotiations. Investors want guarantees that they’ll get a return on their investment. What is your exit strategy? Will they receive a payout or buyback after a certain amount of time, or is the goal to go public?

Importance of Securing Funding for US Startups

The current political climate in the United States favors domestic businesses, so it’s a good time to start one. VCs and investors look for business models that minimize costs and emphasize profits. International companies that import goods and services into the United States don’t fit that model, at least for the next few years. This is a window of opportunity for you.

Another aspect to consider is the interest of foreign entities investing in US companies. That expands your prospect pool in a fundraising round. According to the US Bureau of Economic Analysis (BEA), new foreign direct investments in the United States totaled $148.8 billion in 2023.⁶ That’s likely to increase as the cost of importing rises.

Challenges Faced by New Entrepreneurs

Don’t underestimate the costs of starting a new business. Try not to base them entirely on historical performance. Entrepreneurs face new challenges today that weren’t as prevalent just a few years ago. The reasons for this are increased competition, new technology like AI and machine learning, and government regulation.

Here’s a brief checklist:

• Extended pre-revenue development phases: This is a fancy way of saying product development and market research. The journey to market is longer today because competitors have more tools to launch new ventures. Timing is critical.

• Higher costs for good talent: Engineers aren’t cheap. You’ll be competing for their attention with established companies and other startups. That takes deep pockets, benefits, and a great work environment. You’ll need all of these.

• Marketing and branding expenses: Like everything else, these costs are higher than ever. AI can help with the marketing research, but branding requires human interaction and consumer input. You may need to hire an expert for that.

• Cash flow management: This challenge is the simplest to overcome if you secure sufficient funding. If not, entrepreneurs must decide how to allocate funds to cover essential expenses. Accounting software can help with this.

• Unexpected costs and market events: Inflation dropped to 2.40% in March 2025, down from 9.0% two years ago.⁷ The S&P 500 hit an all-time high in February, but legislation can cause extreme volatility. This could affect your costs.

How Funding Supports Growth

Cash flow is the lifeblood of every company. Start-ups need it to get their operations running. Established businesses require it for growth and scale. That includes accelerating product development timelines, scaling marketing efforts, and hiring specialized talent. These actions should be incorporated into your business plan and pitch deck.

Funding also creates a margin for the unexpected. Expanding into new markets or launching new products is risky. Consumer demand could shift, costs could rise, or internal operations could falter. Savvy business owners build this into their budgets and cash flow projections. Expect the best, but always prepare for the worst.

Types of Startup Funding Options in the US

There are several types of funding to consider when your company needs cash flow. Some of them require a personal investment. Others will dilute your company equity. More importantly, they could affect your ownership stake. Alternative options won’t do that, but there may be a cost.

Here’s a breakdown of the most common types of startup funding:

Self-Funding

Many entrepreneurs fund the early stages of their startup with self-funding, also known as bootstrapping. That’s okay, but be careful about putting personal assets on the line, like houses and automobiles. Losing those if the business fails could be catastrophic. That possibility could affect your decision-making as a small business owner.

Asking friends and family for the money you need could also be considered self-funding because you typically don’t award equity in those scenarios. Unfortunately, family members usually want to get paid back. Defaulting on that might not cause a legal problem, but it will disrupt your home life, especially if it involves in-laws.

Angel Investors and Venture Capital

Angel investors aren’t what you think. They’re venture capitalists who specialize in startup funding. Their investment comes with a cost, usually an equity stake in your company. The terms will be better than a standard VC, and the amounts are typically between $25,000 and $500,000. The approval process for angel investors is usually faster than with a VC.

Venture capitalists offer a more structured investment approach with a formal due diligence process. Their target range is $500,000 to tens of millions. That makes them a good fit for later funding rounds but not for a pre-seed or seed round. VCs also look for equity, so prepare a cap table and ownership plan before approaching them.

Crowdfunding Platforms

There are two types of crowdfunding. Rewards-based crowdfunding offers products or perks rather than equity. Kickstarter and Indiegogo are popular for this. They are set up as social media platforms with marketing and PR benefits beyond the funding itself. The typical range for rewards-based crowdfunding is between $10,000 and $500,000.

Equity crowdfunding can be done on platforms like Republic, StartEngine, and SeedInvest. Investors receive an ownership stake, so the SEC monitors the transactions, making it more formal than rewards-based crowdfunding. That also means the target ranges can be higher. Equity crowdfunding can raise your company up to $5 million.

Small Business Loans and Grants

Loans need to be paid back, but grants are gifts that don’t require repayment. These are simple financial vehicles that don’t need much explanation. Shop interest rates and terms when you’re searching for lenders. The Small Business Administration (SBA) offers loans and small business grants for scientific research, community promotion of entrepreneurship, and exporting.⁸

Looking for a Business Account? Wise Business is a Stress-Free Option For Startups

The right tools make a big difference when managing your startup’s finances. Opening a new business in the United States is more challenging in our current climate. Having the right payment service to do domestic and international transactions is critical. Wise Businessoffers several features that make it particularly suitable for startups:

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These features help startups maintain financial flexibility while minimizing unnecessary expenses during the critical early stages of growth. Contact us today to learn more.

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	Editor & Business Expert:
	Panna is an expert in US business finance, covering topics from invoicing to international expansion. She creates guides and reviews to help businesses save time and make informed decisions. You can read more useful business articles on her author profile.

	Author:
	Kevin D. Flynn is a retired financial professional, business coach, and financial writer. He lives in Leominster, Massachusetts with his wife Evelyn, two cats, and ten wonderful grandchildren. When he’s not working, you’ll find him at the golf course or on his back porch reading classic sci-fi novels.

Sources:

1. Small Business Statistics - Chamber Of Commerce
2. Write your business plan | U.S. Small Business Administration
3. Blue Ocean Strategy
4. The Original Public Meaning of Investment Contract
5. NASPP | A Guide to 409A Valuations for Startups
6. New Foreign Direct Investment in the United States | U.S. Bureau of Economic Analysis (BEA)
7. Current US Inflation Rates: 2000-2025
8. Grants | U.S. Small Business Administration
   All sources checked April 2025.