The SaaS funding process isn’t for the faint of heart. But if you’ve chosen the venture-backed path to build a high-growth company, getting comfortable with fundraising is essential. This guide covers everything you need to know—from the fundamentals to expert advice from leaders who’ve navigated every stage—to help you raise capital and set your company up for long-term success.
Whether you’re just exploring a new business idea or scaling fast, one truth remains: it takes money to make money.
Startup funding is a reality for the 62,000+ businesses that secured angel investment and the 15,852 companies that closed venture deals in 2022.
But with limited capital and a highly competitive landscape—especially in a SaaS market shaped by headwinds since mid-2022—you’ll need more than the basics.
It’s not just about understanding how SaaS funding works. It’s about knowing how to position your business for success at every growth stage. Here’s how.
<<Download the investor due diligence checklist for fundraising success.>>
Types of SaaS startup funding
When your cash runway starts to shrink and it’s clear you need a capital boost, one key question comes into focus: where will the money come from?
If you’re not bootstrapping, there are plenty of SaaS funding options to consider—each with its own nuances. But most fall into a few core categories.
Venture capital (equity financing)
The most well-known type of SaaS startup funding is equity financing from venture capital firms. These are the headline-making deals you’ll see on platforms like TechCrunch—and they often generate buzz across social media.
Equity-based VC investment can happen at nearly any stage, from seed rounds to IPO. But not all firms invest across the board. While major players like Sequoia, Andreessen Horowitz, Lightspeed Venture Partners, Accel, GGV Capital, General Catalyst, and Founders Fund back both early- and late-stage companies, they’re just the tip of the iceberg. With more than 3,000 active VC firms in the U.S. alone, there’s a wide range of potential partners—including many that specialize in specific stages:
- Early-stage (Seed and Series A): Firms like Y Combinator, First Round Capital, and Greylock Partners
- Growth-stage (Series B and beyond): Firms like Insight Partners, Norwest Venture Partners, and Meritech Capital Partners
Resources like The Midas List can help you identify top global firms, but networking is often the most effective way to build investor relationships.
Equity financing is popular because it provides immediate capital in exchange for future returns. At many stages, your company’s vision and growth strategy matter just as much—if not more—than your current financial performance. And if you find the right investor, you gain more than funding: you gain a strategic partner for your next growth phase.
Still, equity financing has its downsides:
- Every funding round dilutes ownership for founders and employees with equity-based compensation
- In a tight market, capital is harder to secure, with many startups chasing limited funds
- Raising a round can take months of intense effort—time founders could spend running the business
- Venture capital typically comes with high expectations for rapid growth, which adds internal pressure
Equity funding remains central to most SaaS fundraising strategies—but it’s not the only path forward.
Venture debt (debt financing)
Venture debt is a type of financing offered by specialized lenders willing to back startups—especially those in earlier stages that may not yet show strong revenue traction. It’s typically raised alongside an equity round to supplement capital.
There are several benefits to pairing equity financing with venture debt:
- Raise additional funds without diluting ownership (since debt usually doesn’t involve giving up equity)
- Access more flexible terms compared to traditional small business loans
- An easier path to capital for later-stage startups with meaningful revenue
- Faster due diligence compared to equity financing
The tradeoff? Venture debt often comes with higher interest rates, shorter repayment timelines, and restrictions on how the funds can be used. These terms are negotiable—but you’ll need to be clear-eyed and strategic when evaluating offers.
In the past, software companies typically avoided debt. Equity was easier to raise, and lenders were hesitant to back software startups. But that’s starting to shift.
“Historically, software companies haven’t had a ton of debt on their balance sheets… because equity was really easy to raise; debt investors were scared by software companies. But we’re starting to see that change a little bit more now… Founders and CFOs are starting to think about taking out more venture debt even if historically they wouldn’t have.” — Jeremy Tsui, Co-founder and CEO, Finley
According to Tsui, the key to successful venture debt is choosing a lender who understands your industry and growth stage. From there, it’s all about comparing offers and finding the best terms for your business—just like you would with equity financing.
Angel investments
Angel investing is a common early-stage funding option, often used by pre-revenue startups during pre-seed or seed rounds.
Like venture capital, angel investing typically involves trading equity for cash to support growth. But instead of raising funds from a firm, you’re securing investment from independently wealthy individuals who are eager to back innovative startups.
Think of it as a step beyond a friends and family round—connecting you with accredited investors outside your immediate circle. The funding amounts can vary widely. Many angel checks fall between $25,000 and $100,000, though some investors may contribute $1 million or more.
For SaaS startups, how much you can raise often depends on your industry and how effectively you pitch to the right angel investors.
Flexible, revenue-based financing
Flexible financing based on SaaS subscription revenue is a growing funding option for startups. Platforms like Pipe offer this type of capital by turning your booked SaaS revenue into upfront working capital—for a fee based on your industry and business performance.
This approach, known as revenue-based financing, lets you borrow against the subscription revenue you’ve already booked but haven’t yet collected. That projected income acts as collateral, giving you a way to support short-term operations without giving up equity.
The key benefits?
- No dilution of ownership
- Easier access compared to traditional loans
However, since the funding is closely tied to your revenue and business health, the amount you can borrow may fall short of your needs—and the terms might not be as favorable as other options.
The 6 main stages of funding
There’s no single formula for turning a startup idea into a well-known brand. But when it comes to financing, most companies follow a familiar path through six main stages of funding:
Pre-seed
This is the earliest—and often informal—round of funding. It typically happens during the idea stage, before a product is developed. Funding might come from friends and family, microloans, or angel investors to help validate the business model.
Seed
The first formal round of capital, seed funding often comes from early-stage VC firms or angel investors. It’s used to develop the business, create a minimum viable product (MVP), and start building out a team beyond the founding group.
Series A
At this stage, your company has early traction and signs of product-market fit. Series A funding is about setting up your go-to-market engine and expanding your customer base.
Series B
This round marks the shift from early-stage to growth-stage. With product-market fit established, Series B funds are used to scale go-to-market efforts, grow the team, and meet rising demand.
Series C / Series D+
By Series C, you’ve reached meaningful scale. These funds are often used to expand into new verticals, launch in new geographies, or prep for an exit. While many companies go public after Series C, others may raise additional rounds (D, E, F) to keep scaling before an IPO or acquisition.
Initial public offering (IPO)
This is the exit point for many venture-backed startups, transitioning from private to public. IPO proceeds often pay back early investors and position the company for long-term, public-market growth. Other paths—like SPACs or direct listings—can also lead to a public listing.
Challenges for SaaS companies in pursuit of funding
The process of raising a funding round can vary widely between companies—and timelines can range from a few months to more than a year. Along the way, several challenges can slow your progress and weaken investor interest. Here are a few common hurdles to watch out for:
Creating a compelling pitch deck
While most SaaS pitch decks follow a standard structure, making your business stand out is essential. One effective strategy is to anticipate the key concerns investors might have—such as margin structure or scalability—and address them directly in your deck. Proactively tackling potential red flags helps shift the conversation toward your strengths and makes it easier for investors to see the value in your business.
Updating investor pitches with the latest data
If your fundraising process stretches over months, one static pitch deck won’t cut it. Each investor conversation should be backed by the latest data. But when financial and operational reporting is manual and time-consuming, you may not have the capacity to keep numbers current between meetings—potentially putting deals at risk.
Managing the due diligence process
Securing interest from an investor is just the beginning. The next phase—due diligence—requires deep transparency. Investors will want detailed reports, quick answers to ad hoc questions, and clear insights into the drivers of your business. Being underprepared can slow the process or jeopardize the opportunity altogether.
Telling your financial story at the right level of detail
Finding the balance between too much and too little information is a common challenge. Regardless of your stage, successful fundraising depends on strong financial storytelling. Investors want to understand the why behind your numbers—not just where you are now, but where you’re headed. Learn when to zoom in on the granular details, and when a clear high-level overview will move the conversation forward.
SaaS startup funding FAQs
How do startups get funding?
Startups can secure funding through several sources, including angel investors, venture capital firms, revenue-based financing platforms, and various debt lenders. Additional options include small business grants, crowdfunding platforms, and business credit lines. The process typically involves networking to find the right investors, delivering a compelling pitch, and navigating the due diligence phase to provide a detailed view of your company’s performance and potential.
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Which funding is best for startups?
The best funding option depends on your company’s stage and capital needs. Early-stage startups (pre-seed and seed) often turn to angel investors, while venture capital becomes more common in Series A rounds and beyond. The right choice will strike a balance between capital raised, equity dilution, and the value of the strategic partnership an investor can offer.
What does a startup need to get funding?
Investor expectations vary by funding type and stage, but the fundamentals are consistent. You’ll need a clear business plan, a well-prepared investor pitch, key legal documents (such as incorporation paperwork and prior investment agreements), a cap table, a financial model with growth projections, and any available historical financials. These materials help investors assess the opportunity and understand your business trajectory.
