Raising your first round of capital can feel like diving into the deep end without a life vest. As a startup lawyer who usually advises first time founders, I’ve learned that successful fundraising isn’t just about having a great idea but it’s also about being prepared and setting realistic goals.

Here’s what you should know before you dive into the fundraising journey.

Know why you are raising funds

It sounds obvious, but first time founders rush to raise capital without a clear plan for how much they need and what they’ll use it for. Investors want to back businesses that understand their own runway needs. Whether it’s to build your MVP, scale customer acquisition, or expand to a new market, be crystal clear about why you’re raising and how it ties into your milestones over the next 12–18 months.

Start with the right fundraising instrument

Different funding instruments make sense for different startup stages. In Southeast Asia, early stage deals still favour equity financing (i.e. priced rounds), but there’s growing adoption of simpler instruments like ‘Simple Agreement for Future Equity’ (‘SAFE’) notes among local VCs. Each type of legal funding instrument comes with different implications for ownership dilution, valuation negotiations, and legal complexity. 

Choosing the right funding instrument can save you significant time, money, and stress down the road, but if you’re using a template agreement, make sure you fully understand its terms or have it reviewed by a startup lawyer to avoid costly mistakes later.

Also, instead of equity financing, which requires selling shares for cash, you can explore government grants or reward crowdfunding, where you raise funds by pre-selling your product or service.

Understand dilution and your cap table

First time founders are surprised to learn how much ownership they may need to give up over multiple funding rounds. That’s why managing your cap table carefully from the start is crucial not just to maintain a healthy equity split, but also to avoid legal issues that can arise from a “broken cap table,” where founders hold too little equity and investors hold too much, potentially making the company less attractive to future investors or acquirers.

In the end, it’s not just about how much you raise but also how much of your company you still own when you get to Series A, B, and beyond. A slightly smaller round today may be better to preserve your long term control. 

Also Read: Startup funding rounds: A handbook from seed to exit

Investors are betting on the “team first, product second”

Especially at pre-seed and seed stages, investors are really backing you. This may include your team’s ability to execute, adapt, and survive the rollercoaster of startup life. Having strong technical and business co-founders helps, but even solo founders can get funded if they show deep domain expertise, resilience, and a clear vision. 

Once you’ve identified a cofounder, make sure to get everything in writing and agree on the terms and economics upfront to ensure everyone is aligned from the start.

Be ready to demonstrate that you are “venture-backable”, not just investible. 

Terms matter, not just valuation

It’s tempting to chase the highest possible valuation, but inexperienced founders often overlook the “fine print” of term sheets, usually things like liquidation preferences and anti-dilution clauses. 

Based on our experience advising startups in Malaysia at Izwan & Partners, we’ve seen how a poorly drafted term sheet can burden a startup for years. Get an experienced startup lawyer early, and make sure you understand the market norms for startup deals in your country.

Due diligence starts from day one

Savvy investors will scrutinise your legal structure, intellectual property ownership, compliance, contracts, and financials. Messy startup formation (wrong legal structure to wrong shareholding structure) can delay or even kill deals. Make sure your house is in order early.

Things include filing the appropriate IP properly, maintaining basic financial records, and having founder agreements in place to avoid co-founder disputes.

Also Read: What did we learn from failing to raise VC funding?

Fundraising is a full-time job

The moment you decide to raise, expect it to take 3 to 6 months of active pitching, meeting, negotiating, and following up. It is exhausting, and it will inevitably distract you from building your product or serving customers. Plan ahead. Delegate operational tasks where possible. Line up your pipeline of potential investors early, not when you are already running out of cash.

Final thoughts

Fundraising isn’t just about convincing investors to believe in you. It’s about building a foundation that will support your company’s long-term growth. Southeast Asia’s startup scene has matured significantly, and with more capital available than ever, the bar for founders is also rising.

First time founders who approach fundraising strategically, not desperately will stand out. Remember, raising money is not the end goal. Building a sustainable and valuable business is.

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