Raising Funds: How to Prepare Your First Round Properly

Quick answer. A first round is prepared like a financial transaction, not like a pitch. Before meeting investors, secure three things: a costed, dated funding need (your cash flow plan over 18 to 24 months), a valuation you can defend, and a clean capitalisation table. The dilution you accept and the choice of instrument (capital increase, BSA-AIR, convertible bond) follow from this groundwork, not the other way round.

In the startup files we support, a first round rarely fails for lack of a good product. It goes off the rails when the founder walks into meetings without having done the financial work first: a rough cash need, a valuation copied from a comparable found online, a shaky cap table. A well-prepared round, by contrast, closes faster, on better terms, and keeps the founder in control of the timeline. This article covers preparation from the finance side, where a chartered accountant adds the most value.

The first mistake is raising because it is fashionable. Raising funds is not a goal, it is a means. You have a good reason to raise when you can answer precisely: what does this money fund, over what period, to reach which milestone?

In practice, the right moment shows up through three converging signals:

• you have demonstrable traction (first customers, first recurring revenue, or strong usage evidence) that makes the valuation a discussion grounded in facts;
• you can identify a point of acceleration that the cash unlocks (a key hire, sales acceleration, scaling an infrastructure);
• your cash flow plan shows you still have several months of visibility, because you never raise well with a knife to your throat.

This last point is underestimated. Launching a round with six weeks of cash left means negotiating from weakness. A seed round in practice takes several months between the first meetings and the funds landing in the account. To steer this horizon, a 13-week cash flow forecast and then an 18-to-24-month plan are the basic tools.

Before discussing valuation, you must answer a simple question: how much to raise? The amount is not guessed, it is built from the forecast cash flow plan. The logic is this: you define the milestone the round must allow you to reach, you cost out what it takes to get there, you add a safety buffer, and you obtain the funding need.

The central concept is runway: the number of months the company can operate on its available cash, given its burn rate. A seed round generally aims to buy 18 to 24 months of runway, enough to reach the metrics that will justify the next round.

Raising too little forces you to raise again quickly, hence to dilute again on poor terms. Raising too much means diluting more than necessary at seed. The right amount funds a clear milestone with a reasonable margin. To structure this work, the support of an outsourced CFO for startups and SMEs helps you hold credible assumptions in front of seasoned investors.

Valuation is the most emotional point of the negotiation. For the founder, it determines the stake given up; for the investor, it determines the expected return. At seed, there is no accounting truth: the company has little history, the classic discounted-cash-flow approach is fragile, and the comparables approach is only indicative.

Our reading: at this stage, valuation is less a calculation than a defensible, quantified narrative. You must be able to explain why your company is worth that amount, on the basis of tangible elements (traction, market, team, advantage), not a multiple applied mechanically. To explore the available methods and their limits, see our guide on valuing a startup in 2026.

Dilution is the direct consequence of the valuation and the amount raised. It is always read post-money: if you raise 500,000 euros at a post-money valuation of 2.5 million, the investor holds 20 % of the capital. On the level of dilution to accept at seed, French market practice most often sits around 15 % to 25 % of the capital. This is an order of magnitude observed across transactions, not a norm: each round is negotiated case by case, depending on the valuation, the amount and the investor profile.

The underestimated risk is not the first round's dilution, it is cumulative dilution. A founder who gives up 25 % at seed, then another 20 % at Series A, then 15 % at Series B, mechanically drops below the control threshold. Anticipate the full trajectory, not just the current round, and reason on a projected cap table.

How the money enters the company matters as much as the amount. Three main routes coexist, with different consequences for the valuation, the investor's status and the timeline.

The capital increase is the reference route for a structured round: the investor becomes a shareholder and the valuation is fixed on the day of the transaction. It is clear, but it requires agreeing on the price right away, which is precisely the sticking point at seed.

The BSA-AIR (rapid investment agreement, a French equivalent of the SAFE) is a private contractual arrangement, with no definition or scale set by any official text. In market practice, it lets the investor pay the funds immediately and convert into shares upon a future event, most often the next priced round. The valuation is therefore not locked at entry: it is set at conversion, adjusted by a discount and a band (floor and cap) that are negotiated. Across the transactions observed, the negotiated discount usually sits around 15 % to 25 %, but this is a contractual convention agreed case by case, not a norm. By its nature, the BSA-AIR does not bear interest, since it aims at entry into the capital rather than the status of a creditor, unlike the convertible bond. For the detail of the mechanism and the parameters to negotiate, see our dedicated analysis of the BSA-AIR in 2026.

The convertible bond is a debt instrument that turns into shares. It usually bears interest and carries a creditor profile until it is converted. It mainly suits a bridge between two rounds with a more debt-like profile.

Trade-off: Capital or a Convertible Instrument?#

Favour the capital increase when you can defend a valuation on facts and the parties want a clear framework immediately. Favour a convertible instrument (BSA-AIR or convertible bond) when it is too early to set a fair price, when you need to move fast, or when you are building a bridge before a larger round. In every case, the instrument is chosen with an adviser, because its tax and legal consequences bind the company for the long term.

Not all funding is equal. A business angel often brings, beyond the cheque, a network, operational experience and the ability to reinvest. A seed fund brings structure and process, but also stronger reporting and governance requirements. The right investor is the one whose horizon and expectations match your project.

Points to watch in the choice:

• alignment of horizon: an investor targeting an exit in three years is not aligned with a project that needs eight;
• the real added value beyond the capital (introductions, hiring, market access);
• the shareholders' agreement clauses, which determine who decides what (a topic to settle from the co-founders' agreement, even before the round);
• the follow-on capacity: an investor able to reinvest at the next round secures your trajectory.

The tax incentive also matters on the individual investor's side. For a subscription to the capital of an eligible SME, the income-tax reduction known as IR-PME, set out in Article 199 terdecies-0 A of the French Tax Code (CGI), can reach 18 % of the amount invested, under the conditions and limits set by the texts in force in spring 2026. For subscriptions to the capital of an innovative new company (jeune entreprise innovante, JEI), an increased rate of 30 % applies to payments made between 1 January 2024 and 31 December 2028, on the basis of Article 199 terdecies-0 A bis of the CGI, with specific caps (75,000 euros for a single person, 150,000 euros for a couple taxed jointly). A rate of 50 % is also provided for breakthrough innovative new companies (JEIR), subject to a level of research spending of at least 30 %, with their own caps (50,000 euros and 100,000 euros). These schemes evolve: have the eligibility and the applicable rate confirmed at the time of the transaction.

A serious investor runs due diligence. The more your documents are ready and consistent, the faster the process and the higher your credibility. Conversely, a messy data room sends a negative signal about management discipline.

Checklist of the financial and legal items to gather before the first meetings:

• Forecast cash flow plan over 18 to 24 months, with explicit assumptions
• Business plan and forecast income statement
• Up-to-date annual accounts and interim positions
• Current and post-round projected cap table
• Up-to-date articles of association and minutes of decisions
• Existing shareholders' agreement where applicable
• Structuring customer and supplier contracts
• Status of intellectual property (trademarks, code, patents)
• Tracking of key metrics (recurring revenue, acquisition, retention)

To build this data room methodically, see our 90-day data room checklist. This is often where the difference plays out between a round that drags and one that closes.

The most recurring blocking point in seed files is not the valuation, it is the cap table. Capital split equally between co-founders with no vesting, a former partner who left with their shares, verbal BSPCE promises never formalised: all of these are signals that worry an investor and can derail an advanced round.

Before raising, clean up your cap table: formalise founder vesting, regularise departures, document incentive plans, and project post-round dilution. A clear, defensible cap table reassures the investor and speeds up the negotiation.

The success of a first round rests on three disciplines. First, never raise in a panic: prepare the round while cash still offers visibility. Second, size the need through cash flow, not through a round number chosen up front. Third, reason about dilution over the full trajectory, not just the current round.

The classic trap is to focus on the maximum valuation at the expense of investor quality and a clean structure. A stretched valuation obtained from a misaligned investor, on a fragile cap table, sets up a painful next round. A reasonable valuation with a good partner and a sound structure is worth more.

1. Build the cash flow plan over 18 to 24 months and identify the milestone to fund.
2. Size the funding need and set the amount to raise.
3. Work out a defensible valuation and simulate post-round dilution.
4. Choose the right instrument (capital, BSA-AIR, convertible bond) with an adviser.
5. Prepare the data room before the first meetings.
6. Target investors aligned with your horizon and your need.
7. Negotiate the financial terms and the shareholders' agreement, instrument in hand.