What Types of Startups Raise Funds? and the Right Time to Do It
- Awake Partners
- Sep 17
- 4 min read
TL;DR — Fundraising Fit & Timing:
Not every startup needs to raise external capital.
Tech, DeepTech, consumer, and ClimateTech startups often seek funds early.
The right time to raise depends on traction, product-market fit, and growth stage.
Investors back momentum — founders must show readiness, not just ideas.
Raising capital is never one-size-fits-all. Some startups need external funding from day one to fuel hypergrowth, while others can thrive bootstrapped for years. The real challenge? Knowing exactly when to raise — and whether your type of startup is the kind investors are eager to back.
In this guide, we break down:
The types of startups that typically raise external funding
The ideal timing for a fundraising round
Key signals that indicate readiness for investment
Why Startups Raise Funds
Startups raise capital for many reasons—market expansion, product development, talent acquisition, and often, just to survive long enough to reach product-market fit.
The type of funding a startup seeks (seed, Series A, etc.) depends largely on its business model, growth trajectory, and capital intensity.
According to CB Insights, lack of funding remains a top cause of startup failure.
Types of Startups That Typically Raise Funds
1. Tech-Driven Startups
SaaS, AI, Fintech, Biotech
These startups often require significant upfront investment in R&D, product development, and engineering talent. Investors are drawn to their scalability and potential for high margins.
Examples:
AI-based risk management platforms
SaaS tools for enterprise workflow automation
Biotech firms in pre-clinical stages
💬 Why they raise early: To fund development cycles and acquire market share quickly.
2. Deeptech & Hardware Startups
Building a physical product or a deeptech solution (e.g. robotics, quantum computing) is capital-intensive. These startups often need to prove technical feasibility long before generating revenue.
Examples:
Medical devices
IoT-based manufacturing tools
Satellite and space tech companies
💬 Why they raise early: Long product cycles and high R&D costs demand early-stage capital.
3. Consumer Startups with Virality Potential
Startups in e-commerce, marketplaces, and consumer apps may seek funding to accelerate user acquisition, brand marketing, or operations.
Examples:
DTC (Direct-to-Consumer) lifestyle brands
Mobile health & fitness apps
Food delivery platforms
💬 Why they raise: To scale fast and capture network effects or market share.
4. ClimateTech and Impact Startups
Sustainability-focused startups often benefit from grants, impact funds, and green investors. These ventures tend to raise both equity and non-dilutive capital.
Examples:
Renewable energy tech
Carbon offset platforms
Circular economy logistics solutions
💬 Why they raise: To finance large-scale infrastructure or prove complex new models.
When Is the Right Time to Raise Funds?
There’s no universal answer—but successful fundraising depends on timing, not just need.
Below are 3 key stages when startups typically raise:
✅ 1. Pre-Seed / Seed Stage
📍 Timing: MVP ready or early traction
📍 Goal: Build team, validate market
📍 Metrics: Early user growth, problem-solution fit
"You’re solving a real problem, and you can show early signs of demand."
✅ 2. Series A
📍 Timing: Product-market fit achieved
📍 Goal: Scale product, hire, enter new markets
📍 Metrics: Strong retention, growing MRR, clear go-to-market strategy
"You’re ready to transform early momentum into structured growth."
✅ 3. Series B and Beyond
📍 Timing: Business model proven
📍 Goal: International expansion, M&A, operational excellence
📍 Metrics: ARR over €1M+, CAC < LTV, repeatable sales processes
"You’re scaling fast and need capital to stay ahead of demand."
As Y Combinator advises, raising too early can hurt valuation and founder leverage.
Signs You May Be Raising Too Early
No clear traction or KPIs to show
Still exploring product-market fit
Fuzzy go-to-market strategy
Unclear capital use plan
📌 Tip: Investors fund momentum, not ideas.
Fundraising Benchmarks in Europe
Stage | Typical Round Size (EUR) | Key Metric |
Pre-Seed | €100K – €500K | MVP, team strength |
Seed | €500K – €2M | Traction, early revenue |
Series A | €2M – €10M | PMF, revenue growth |
Series B+ | €10M+ | Scale & expansion KPIs |
Final Thoughts
Not every startup needs to raise external funding—but if you're in a high-growth, capital-hungry sector, it’s often a critical enabler. The right time to raise is when you can clearly articulate your story, show traction, and map out a compelling growth plan.
Key Takeaways
Fundraising isn’t universal — capital-intensive and high-growth sectors raise earlier.
Timing matters: Pre-Seed for validation, Series A for scaling, Series B+ for expansion.
Momentum, clarity, and a strong use-of-funds plan are what investors want to see.
👉 If you're preparing your fundraising round, Awake Partners helps startups across Europe craft bulletproof investor strategies — from pitch deck design, warm introductions to investors, to term sheet negotiation.
Q&A — Quick Answers for Founders
Q: What types of startups usually raise funds?
A: Tech-driven (SaaS, AI, Biotech), DeepTech & hardware, consumer platforms, and ClimateTech ventures are the most common.
Q: When is the right time to raise funds?
A: Typically at Pre-Seed/Seed with MVP + traction, at Series A with product-market fit, and Series B+ for scaling and expansion.
Q: Why do some startups not raise external capital?
A: Bootstrapped startups can sustain growth through revenue, preserving equity and founder control.
