Common Ways Startups Raise Capital

Priced Rounds: Priced rounds are a traditional way to raise capital. In a priced round, a startup sells equity (i.e. shares) in exchange for capital from investors. The price per share is determined by the startup's valuation, which is often set by negotiation between the startup and the investors.

Convertible Notes: Convertible notes are a form of debt financing that can be converted into equity at a later stage. In a convertible note, investors lend money to the startup with the expectation that the loan will convert into equity when the startup raises its next round of funding. Convertible notes often have a discount or a valuation cap that applies to the conversion of the debt into equity.

SAFE (Simple Agreement for Future Equity): SAFE is a newer form of financing that is often used in early-stage fundraising. SAFE is a convertible security that converts into equity when a triggering event occurs, such as a future financing round or an acquisition. SAFE is similar to a convertible note, but it does not accrue interest or have a maturity date.

Revenue-based Financing: Revenue-based financing is a type of financing in which investors provide capital in exchange for a percentage of the startup's future revenue. This type of financing is often used by startups that have predictable revenue streams and do not want to give up equity.

Crowdfunding: Crowdfunding is a way for startups to raise capital from a large number of individuals, often through online platforms. Crowdfunding can take different forms, such as rewards-based crowdfunding, donation-based crowdfunding, or equity crowdfunding.

Grants: Startups can also raise capital through grants from government agencies, non-profit organizations, or private foundations. Grants do not need to be repaid and can provide much-needed funding for research and development, social impact projects, or other initiatives.