How a startup fundraise actually works.
The stages, the instruments, what dilution does to you and the terms you will meet. Plain language, no hype, and no form required to read it.
The long road, in stages
Each stage asks for different proof. Skipping ahead is how rounds stall.
Prepare
Story, metrics, model, cap table, compliance and a researched investor list.
Approach
Warm introductions, first meetings and the discipline of a running pipeline.
Diligence
Investors verify claims. Gaps, even small ones, slow or end deals.
Term sheet
Valuation, rights and conditions are negotiated. Advice matters here.
Close
Definitive documents, conditions and funds. Then the real work begins.
Choosing how to raise.
Four common routes. The right one depends on stage, structure and what you are willing to give up.
Equity (preference shares)
Investors buy shares, often compulsorily convertible preference shares, at an agreed valuation.
- DILUTION
- Direct
- OFTEN SUITS
- Seed rounds onward with a clear valuation
- WATCH OUT FOR
- Investor rights, liquidation preference, board seats
Convertible instruments
Money now that converts to equity later, usually at the next priced round.
- DILUTION
- Deferred
- OFTEN SUITS
- Early rounds where valuation is hard to fix
- WATCH OUT FOR
- Caps, discounts and conversion terms. Structure in India needs legal advice
Venture debt
A loan to a startup that already has revenue and a funded balance sheet.
- DILUTION
- Low or none
- OFTEN SUITS
- Extending runway between equity rounds
- WATCH OUT FOR
- Repayment pressure, covenants, security
Grants and schemes
Government and institutional programmes that fund early work.
- DILUTION
- None
- OFTEN SUITS
- Very early or research-led ventures
- WATCH OUT FOR
- Eligibility, paperwork, slow disbursal, reporting
What a round does to ownership.
Look at the whole path, not just the cheque in front of you.
Every round changes who owns what.
Dilution is normal. The question is whether the money buys enough progress to make a smaller slice worth more.
Terms you will meet.
Understanding these before the term sheet arrives is the difference between negotiating and just signing.
Pre-money and post-money valuation
Pre-money is what the company is valued at before the new money. Post-money adds the new investment. Your percentage sold equals the investment divided by post-money.
Liquidation preference
Decides who gets paid first, and how much, when the company is sold or wound up. It can matter more than the headline valuation.
Anti-dilution protection
Protects investors if a later round is priced lower. Weighted-average and full-ratchet versions treat founders very differently.
Option pool (ESOP)
Shares set aside for employees. Investors often want the pool created before their money comes in, which dilutes founders, not them.
Vesting and cliff
Founders’ shares typically vest over time. Investors expect it, and it protects the company if a founder leaves.
Pro-rata and information rights
Rights to invest in future rounds to hold a percentage, and to receive regular reports.
Board seats and protective provisions
Control terms. They decide which company decisions need investor consent.
Conditions precedent
Items to complete before funds are released: filings, approvals, clean-up. A common cause of delay after the term sheet.
What investors verify.
Diligence is where weak preparation shows. Each area below will be checked, usually in more detail than founders expect.
- Corporate. Incorporation documents, statutory registers, board and shareholder approvals, filings.
- Financial. Statements, tax filings, bank reconciliations, the model and its assumptions.
- Commercial. Customer contracts and references, pipeline, churn and the evidence behind your metrics.
- Legal and IP. Founder and employee agreements, IP assignment, licences, disputes.
- Team. Backgrounds, references, key-person risk and the plan to hire.
Common questions.
What is the difference between pre-seed, seed and Series A?
They are loose labels for stage and expected proof. Pre-seed backs the team and early validation, seed expects a working product and early traction, and Series A usually expects repeatable growth and clear unit economics. Expectations vary by market and investor.
Should I take a convertible instrument or priced equity?
It depends on your stage, how well you can justify a valuation and what investors will accept. Convertibles defer the valuation conversation but add terms to understand. Get legal advice on structure in India.
How much should I raise?
Enough to reach the next meaningful milestone with a buffer, not the most you can get. Investors will ask you to justify the number line by line.
Do I need a lawyer?
Yes, before signing a term sheet or definitive documents. Jaush can help you understand terms and prepare, but cannot replace independent legal advice.
Please note. Jaush does not guarantee funding, a valuation or investor interest, and is not itself an investor. Introductions and support are subject to applicable law and to investors’ own decisions. Any engagement, scope and fees are agreed in writing before work begins. Nothing here is legal, tax or investment advice. Take professional advice before signing term sheets or definitive documents.
Find out where you stand.
The readiness scorecard takes five minutes and does not need a form.