Growing companies hit a point where internal cash flow and debt financing no longer stretch far enough. When that day comes, the next question is often the hardest one: Do we raise equity, and if so, how?
Over the years, I’ve raised equity for both a venture-backed startup and a publicly traded company. In both cases, the capital unlocked product development, accelerated growth, and provided the working capital necessary to scale. The process was transformational but also demanding.
Here are the most meaningful lessons learned from navigating equity raises of all sizes, including an IPO.
1. Your Story Matters More Than You Think
A strong pitch deck isn’t just nice to have, it is the roadmap investors use to understand the business. It should clearly lay out:
- The market you serve
- Your largest customers and proof points
- Competitive differentiation
- How the funds will be used
Most importantly, it should highlight the management team. Many investors view early-stage equity as a bet on the people running the business, not just the business itself.
Alongside the pitch deck, multi-year financial projections and a well-organized data room make the diligence process smoother. Advisors, investment bankers, attorneys, and commercial bankers, can provide checklists for what investors expect to see.
2. Understand Valuation, and the Ownership You’re Trading
Equity investors evaluate one number first: the pre-money valuation. That figure determines how much of the company they’ll own in exchange for their investment.
Founders and owners should enter the process with realistic expectations about dilution. Larger checks often come with larger stakes, and it’s common for new investors to request a board seat or observer role.
This isn’t inherently negative, it’s about finding a capital partner whose involvement actually helps move the business forward.
3. Choose Investors Who Do More Than Write a Check
The right equity partner should bring:
- Industry knowledge
- Relevant relationships
- Experience scaling companies
- A collaborative working style
Chemistry matters. These individuals become part-owners of the business, so evaluating how they’ve supported other portfolio companies is a smart due-diligence step.
4. Look for Follow-On Support From Existing Investors
Nothing signals confidence more clearly than existing investors reinvesting. Their continued involvement:
- Validates the company’s trajectory
- Reduces concerns for new investors
- Helps early investors manage dilution
Momentum matters in fundraising, and follow-on participation creates it.
5. IPOs: A Different Scale, Same Fundamentals
One of the equity raises I completed was an Initial Public Offering on the New York Stock Exchange. While the stakes were higher, the fundamentals stayed consistent: a compelling story, strong financials, and thorough preparation.
Key components included:
- Completing the S-1 filing and multiple rounds of SEC review
- Providing three years of audited financials
- Conducting a roadshow with institutional investors
The process was complex, but the rigor helped build trust before entering the public market.
6. Raise the Right Amount—Not the Most Amount
It’s tempting to raise as much capital as possible, but more isn’t always better.
A healthy rule of thumb: Raise 12–24 months of operating runway, tied to specific milestones such as product launch, revenue goals, or customer acquisitions.
Over-capitalizing increases pressure and expectations, sometimes beyond what’s practical for the stage of the business.
7. Investor Relationships Don’t End After the Check Clears
Equity comes with an ongoing responsibility to communicate clearly and consistently. After the raise, companies should:
- Provide timely financial statements
- Hold regular board and investor meetings
- Flag challenges early to avoid surprises
Strong relationships with investors build confidence, reduce friction, and create long-term stability.
Bottom Line
Equity can be a powerful catalyst for growth, when the right partners, expectations, and processes are in place. Preparing proactively and choosing strategically can turn a capital raise into one of the most impactful decisions a business makes.
About the Author
Deane Baron is a seasoned financial leader with a proven track record of driving results for small- and medium-sized businesses across the U.S., Canada, and Mexico. With broad industry experience spanning technology, software, and manufacturing, Deane excels at strengthening financial performance, accelerating cash flow, and building accountability around key business goals and metrics.
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