Introduction

So, you have an idea for a startup that's going to be the next big thing. The only problem is that you need investment money to make your dream a reality.

There are cost barriers to overcome every step of the way: building an MVP, market research, scaling a user base, growing the business, and even just sustaining the day-to-day operations.

Early on, you'll have a limited track record and may lack a robust user base. Once you conquer those Series A investment levels, scaling operations and expanding market reach will likely require another fundraising round. Knowing the challenges at each funding stage and the strategies to overcome them is paramount if you're going to succeed.

If you're preparing to raise capital for your early-stage startup, then dig deep into the insights below from the HubSpot for Startups ‘Startup Fundraising Report.' You'll find a breakdown of the top challenges and strategies to arm yourself for successful fundraising campaigns in 2025 and beyond.

Leading challenges at each funding stage

Each funding stage comes with unique challenges to securing investments. Here are some of the biggest obstacles startups will face as they prepare to pitch to investors.

Pre-seed and seed-stage funding challenges

Establishing credibility as a candidate worth backing is the biggest headache for pre-seed founders, and that's before proving the viability of a business idea. 

Your network is your net worth; it's a phrase that comes into sharp focus when hunting down your first business investment. The majority of new founders lack the contacts and reputation of established entrepreneurs. In fact, 75% of pre-seed and seed founders say that access to investors is their biggest fundraising challenge right now.

Josh Garrison, VP of Content Marketing and Product Education at Apollo.io, echoed this sentiment, "People told me the only way to get in front of a VC is a warm introduction. The problem with that for somebody like me is I don't come from a wealthy background. I didn't go to an A+ school. I don't have those connections."

Without a proven track record, investors are hesitant to commit funds. If you don’t present compelling evidence, even getting face time and proving your potential can be tough.

Series A funding stage challenges

Once you've locked in your seed funding, the real sprint begins to demonstrate product-market fit and potential scalability. Your product needs to launch and obtain substantial user growth alongside a sustainable business model.

It won't be long before you're hunting down series A funding, whether that's from your original backers or new investors. However, timelines have slowed in recent years. On average, your business plan needs to account for your subsequent funding, which will take another 10 to 14 months after your seed.

"Following our seed round, our next milestone was to pass $1M ARR. We hit that milestone and raised our Series A led by Nexus Venture Partners, with participation from the YC Continuity Fund and some other incredible angels," said Arjun Mahadevan, founder of doola. 

Series B funding stage challenges

While early fundraising rounds need to scream, "People really want this," Series B is less about ideas and more about business fundamentals. Even with exciting early growth, investors want to know:

• How repeatable is the growth?
• How fast can you grow?
• Are customers happy and recurring?

“For SaaS businesses, $1M in ARR is a good indicator for Series A, and for Series B, the latest I'm hearing is $6-10M ARR,” Mahadevan explained. “But that's also a function of how fast you've reached those milestones and how healthy your economics are to get there. But happy customers are the most important thing.”

Alongside this, finding an "inflection point" to provide evidence that your startup is sitting on explosive growth is the name of the game, according to Josephine Chen, a partner at Sequoia Capital.

"It could be attention. It could be user growth. It could be product velocity because people are asking you for more features. But there's something that is hockey sticking, something that is inflecting, and you want to identify that and double-click on that,” Chen said. 

Five strategies to overcome startup fundraising challenges

Just because there are challenges to fundraising as a startup doesn’t mean you need to face them unprepared. Founders can use the following five strategies to overcome fundraising barriers.

Build a strong network

A deep network provides valuable introductions and endorsements, which lead to a significant increase in the likelihood of successful fundraising. Building and developing connections within an industry offers far-reaching effects throughout your startup journey. It increases credibility to gain introductions and recommendations, which are crucial in securing meetings with investors. 

Warm introductions through connections or referrals are the most effective fundraising method. It's particularly effective at the seed stage, where 23% of startups report it as their most successful route to investment. This method outstrips all other options discussed in the Startup Capital Annual Report.

"Be present on LinkedIn, attend conferences, and show up where your ideal investors are," said Eva Dobrzanska, managing director of Fundraising Playbooks. "You're going to be speaking to so many people, and there are so many things to remember. A good CRM is paramount. People do business with people they like, and people invest in people they like."

Cold outreach

For many, cold email has become a dirty phrase. However, before you dismiss it, you should know that it's the second most effective method for connecting with seed investors. Plus, there's a world of difference between bad and good cold outreach. The latter can be particularly lucrative in gaining the attention of potential investors. "For most cold emails out there nowadays, the bar is on the floor. If you implement some small changes, the return on investment is big,” Dobrzanska said.

You just need to know how to approach cold outreach in a way that feels personal rather than spammy. Identifying and researching potential investors and tailoring your outreach message to each investor is an instant way to build rapport in a prospect's inbox. 

"I'm a damn good email writer and a good marketer. So, I built my list, did my research, and crafted emails. And I booked 20 first meetings with VCs from those cold emails," Garrison explained.

Forward-thinking founders are even adopting an AI-first approach to beating competitors to funding. Those using AI for tasks like personalized cold outreach are raising more money in the seed stage.

Create a compelling pitch deck

The job of a pitch deck is to highlight a startup's value proposition, market opportunity, and potential growth. Problem statements, solutions, market analysis, business models, and financial projects all demonstrate in-depth marketing knowledge.

Developing a clear and persuasive deck requires more than simply presenting data to investors. Crafting a narrative to engage investors and communicate your mission can be the difference between success and failure.

If your network and outreach are helping you get in front of investors, your pitch is your ticket to closing deals. Even then, it takes dozens of pitches to secure initial funding. According to the Startup Capital Annual Report, 52% of founders pitch to at least 10 funders to find their first investment.

Demonstrate traction

Investors look for signals and evidence to build confidence at every funding stage. Therefore, it is critical to provide concrete evidence of secured funding, user growth, revenue generation, and market demand.

This evidence helps potential investors validate your business model and understand risk. It's important to highlight these key performance indicators at every opportunity and solidify them with testimonials and case studies from satisfied customers. Combining these factors also enables you to illustrate market demand.

Highlighting significant milestones like product launches, partnerships, and market expansions demonstrates the traction investors seek in a winning startup.

Seek strategic partnerships

Strategic partnerships provide startups with added resources and boost credibility with both customers and investors. Forming alliances with established companies and recognized industry players instantly enhances a startup's reputation.

Access to new resources, improved market position, and co-developmental opportunities also help to inspire confidence in investors. 

Early on, you'll need to go searching for potential partners. Companies that align with your own goals and values are a useful place to start. In addition, relationship-building with key contacts in an organization is required before exploring partnership opportunities.

Focus on what you can bring to the table and how you can help other businesses achieve their visions. Your network and outreach could also play a huge role here, making them core assets and skills favorable to startup outcomes.

Conquer early-stage startup challenges to earn investments

Turning your billion-dollar idea into reality requires a clear understanding of the challenges and strategies of startup fundraising. From building credibility to demonstrating scalable growth, every stage has its unique hurdles to overcome.

Building a strong network provides a solid foundation for booking meetings, winning deals, and adding strategic partners. Cold outreach, coupled with a rich CRM to track prospects, offers a scalable way to improve your startup's awareness. When done well, this tactic gives you an almost limitless pool of investors to approach. Creating a compelling pitch deck to demonstrate traction and market fit enables you to make the most of all opportunities.

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