How Long Does It Take to Raise Capital?

No matter how strong your business idea is, without the necessary capital to get it off the ground, your startup may never reach its first customer. 

But if you’ve ever tried to raise funds before, you’ll know that it takes more than simply pitching your idea to a group of potential investors. It can be an extremely time-consuming and stressful process.

So, how long does it actually take to raise capital? There’s no single answer, but it could take anywhere from a few weeks to over a year.

It largely depends on the type and amount of funding you’re seeking, your current growth stage, your prior experience as a business owner and the strength of your finances.

This guide breaks down the capital-raising timeline further to help you understand all the factors that go into raising capital.

Pre-Seed Funding Stage

Pre-seed funding is the first investment round a startup goes through and is completed before any equity is exchanged with investors. 

At this stage, founders often rely on their own savings, along with contributions from friends, family, accelerators and angel investors who are willing to take an early risk on the business idea. 

Most frequently, pre-seed funding is raised through Simple Agreements for Future Equity (SAFEs) or convertible notes.

Startups in the pre-seed stage typically seek to raise anywhere from $50,000 to $1 million, just enough to properly launch their business.

It’s also worth noting that not all startups complete pre-seed fundraising. Many go straight to the seed round instead.

How Long Does the Pre-Seed Stage Take?

At this stage, your startup is still an idea rather than a proven concept. You likely have a product prototype and have done market research, but you don’t yet have staff or a finished product ready to launch.

The pre-seed stage may take anywhere from several months to over a year. The timing and amount of funding will largely depend on the resources you already have.

Experienced business owners with cash in the bank and several wealthy family members may be able to come up with funding for a new venture in a matter of weeks. 

On the other hand, new entrepreneurs starting out for the first time may find it more challenging to come up with funding.

Seed Funding Stage

Once you’ve got your startup off the ground, it’s time to start raising more capital to bring your business to the next level.

For many startups, the seed stage marks the first official round of fundraising. By this point, you should have a minimum viable product (MVP) that shows real market demand, the foundation of a team and a well-developed business plan. 

Seed money is typically used to further fund product development, bring the product to more people in your target market and expand your team.

Seed funding can be raised from a variety of sources, including:

• Private investors
• Venture capital firms
• Angel investors
• Crowdfunding

Depending on the industry and valuation of your business model, the average seed funding round ranges from $1 million to $5 million. 

It’s also very important to create an accurate financial model to understand how much capital your business truly needs. Without proper planning, you risk raising too much or too little, which can make future fundraising more difficult.

How Long Does a Seed Round Take?

It’s rare for a startup to find seed funding after only one investor meeting. In 2021, it took an average of 18.5 weeks for seed-stage startups to complete the fundraising process, with an average of 39 investor meetings. 

The timeline for seed fundraising can be somewhat unpredictable, though. About 37% of startups complete their fundraising within one to six weeks, while 16% take more than 25 weeks. 

Want to increase your chances of success? Show up to investor meetings with a strong business model and a compelling pitch deck to share.

Series A Funding

Series A funding is the next step a company will take to raise capital as it matures. You should consider initiating this round once your company has found success within your target market and is ready to scale.

Before starting this round, your startup will need to be properly valued by analysts to determine metrics like growth rate and revenue. This helps venture capitalists and investors assess the true value and future potential of your company.

This funding round is used to give you working capital for the next 6 to 18 months. It will allow you to hit the milestones laid out in your business plan and demonstrate that you’re ready for the next stage.

Companies seeking Series A funding are typically looking to raise anywhere from several million to tens of millions of dollars.

How Long Does the Series A Round Take?

On average, it takes about six months to raise funding in this round. 

Some business owners raise this funding themselves, while others choose to work with professional advisors who understand the complexities of fundraising and communicating with investors.

Series B Funding and Beyond

Series B, Series C and all other future funding rounds are used to accelerate growth. Completed by more mature companies that are past the startup stage, these rounds help you expand into new markets, scale up operations, develop new products and acquire new resources.

Typically, companies in the Series B fundraising round are seeking tens or hundreds of millions of dollars. As companies at this stage have a proven track record, they are seen as less risky for investors than brand-new startups.

Most often, companies at these stages use an in-house CFO and financial advisors to help make funding decisions.

Final Thoughts

Is fundraising taking longer than expected? While it can be frustrating, it’s not uncommon. It takes many companies months, or even over a year, to successfully close a round.

So, make the most of it: use this time to build positive connections with customers, refine your pitch and keep your books in order.

You may also want to work with an outsourced advisory and fractional CFO service. Consulting with a professional can help you refine your funding request and plan your next move.

Ready to secure funding for your growing business? Let Finvisor’s team of experts help. Get in touch today and see how we can guide you through the complexities of raising capital.