The total number of venture deals declined in Q1. With funding getting tighter and tighter, it’ll pay to review what they’re looking for before you start reaching out.
Every startup owner dreams of a Series A. But before you get there, you’ve got to survive the early stages. However, indinero fractional CFOs specialize in helping startups raise major funding rounds. Download our Series A checklist and, when the time comes, be sure to reach out.
WWhat Is (and Isn’t) Venture Capital?
Lots of new companies call themselves startups. And rightfully so! They’re recently founded. But in the eyes of venture capitalists, not every business qualifies.
Let’s get clear on the type of company VC investors are interested in:
- Highly scalable, high-risk businesses in emerging markets that have potential to be the next Amazon, Uber, or OpenAI
Most VC funds expect 95 out of 100 companies will never turn a profit; they’re looking for that one unicorn that returns the value of the entire fund, and then some. They’re chasing outlier returns.
If that doesn’t sound like your business, that’s OK. Only ~1% of companies ever receive startup funding. To explore more traditional funding avenues, check out our free SBA loan guide or how to get a business loan with bad credit.
Types of VC Investors for Young Startups, and How to Talk to Them
For starters, fundraising isn’t Shark Tank.
Most pitch competitions, where entrepreneurs get in front of investors and field rapid-fire questions, aren’t actually for the startups: they’re marketing events for the organizations that host them, and networking opportunities for the investors that wind up on the panels.
For you? Finding investors is a series of low-key coffee chats. Human-to-human conversations where you can share your idea, or better yet, show off a prototype.
Here’s who you’ll be meeting:
Friends and Family
If you know someone with some money, just ask. They don’t think you’re working on the next Google; they love you and want to support you.
We recommend only accepting money from people you know can afford to lose every dollar they invest. Most startups never turn a profit after all.
Angels
High-net-worth individuals investing their own money.
Some are savvy former founders who’ve been in your shoes. Others are professionals (doctors, lawyers, corporate executives) who are adventurous enough to invest in something other than a 401(k).
They’re not necessarily professional investors, so be careful taking their advice (or rejections) too seriously.
To talk to them, start with relationship building. Most HNW people are used to getting cold emails, so if you’re going to take that approach, it’s important to tailor your approach to the specific person you’re reaching out to.
Better yet, though, is to work your way through the networking grapevine with warm introductions. Most cities have local startup communities or pitch events, and your very own network of angels is just one or two introductions away.
Seed Funds
These funds sit between the non-professional angels and the larger VC firms. They typically write $250k – $1M checks and often lead pre-seed or seed rounds. Many are funded by former entrepreneurs themselves.
The key to remember is that these folks do nothing but hunt for the next deal. It’s their job to fund startups, so don’t be afraid to reach out.
They’re looking for:
- Traction, revenue, users, and working prototypes
- Companies that fit their profile: funds often specialize in sectors, cities, or solving specific problems
- Founders who prove they’re the right person for the job
| Related: Are you trying to sell equity, but don’t want to spend money on lawyers to help structure deals? Look into SAFE (Simple Agreement for Future Equity) notes, free standardized startup agreements that are common in Silicon Valley. |
What Are Professional VCs Looking For?
Instead of speculating, let’s analyze how a top firm, Y Combinator, actually vets startups for their $500,000 deals.
You may not be pitching them just yet, but by preparing for their questions now, you’ll be better positioned for the conversations you already have, as well as for the future.
Each of these questions is from the Y Combinator Summer 2025 cohort application:
| Question | Insight |
| How much progress have you made? Do you have revenue? | Momentum is the strongest signal you can send. They call it “ramen profitability.” Being solvent enough to survive without funding proves you could scale and go the distance with funding. |
| What does your company do in 50 characters or less? | Investors want clarity. If you can’t explain what you’re building quickly, you may not understand it deeply enough. |
| What problem are you solving, and why this idea? | VCs are betting on insight. Why you? Why now? They want to see founder-market fit, and conviction. |
| Who writes your code? | Tech startups are hyperscalable, perfect for VC funding. Plus, execution matters. They want to know you can build, not just brainstorm. |
| Is anyone using your product? | Traction is table stakes in 2025, and a demo beats a pitch deck every time. |
| What tech stack are you using? | This demonstrates technical fluency. Plus, YC probably has some suggestions, and it helps to know what you’re already using before they can make them. |
| Who are your competitors? | Savvy founders know the landscape. If you don’t, investors will worry you haven’t done your homework. |
| How will you make money, and how much could you make? | VCs want to see the path to returns. Show them the math, and don’t be afraid to dream big if the logic is sound; that’s exactly what they’re looking for. |
| Have you taken investment already? Do you have a legal entity? | These are hygiene questions. A clean cap table and a structured legal entity reduces friction during the deal process. |
Focus on Metrics That Matter
The first thing Y Combinator asks for is progress. But other than revenue figures, what data can you share? Here are some ideas:
- Weekly active users
- Conversion rates from demo to sign up
- Retention rates
- Revenue per user
- Customer lifetime value to acquisition cost ratio
- Waitlist signups
Anatomy of a Funding Round
Early-stage rounds rarely look like something you’d find in a press release. They’re quiet, put together over months, and take a lot of meetings.
For example, here’s how Fresh Paint, a data platform for online businesses, raised its first $1.65M.
- They pitched 160 investors over 4.5 months, closing 39
- Most leads came from their existing network or warm introductions
- Investments ranged from $5000 – $200,000. Angels invested less while professional funds invested more
Fresh Paint’s top advice to other founders?
- Focus on introductions rather than cold outreach. They didn’t know many people, but after they had just one or two checks, their investors were happy to introduce them to their networks
- Don’t bring pitch decks to introductory meetings. Investors are looking for founders, rather than ideas, at this stage; it’s hard for them to get to know you if you’re reading from a PowerPoint. Just talk to people. Have conversations.
Final Thought: Be the Bet
If there’s one thing to remember, it’s this: investors don’t need you to have it all figured out, but they need to believe that you can.
In 2025, the most fundable founders aren’t the flashiest. They’re the ones who ship, iterate, stay lean, and build something that gets traction before they go looking for investors.
So build. Talk to users. And when you’ve got some revenue and a demo to show off, start inviting people to coffee chats.
