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5 key considerations for entrepreneurs seeking early-stage capital

Photographic portrait of Jeff Leach
Jeff Leach

Executive Director, Private Equity, Ernst & Young LLP

4 minute read 19 Mar 2026

Founders should understand the pros and cons of early-stage fundraising when considering an institutional investment.

In brief
  • While investors often have different goals and reasons for funding startups, most are eager to access innovative technology.
  • Governance is a significant factor to consider. Founders should prepare for an outsider who will have an important say in their company’s future.
  • Founders should not rush to accept a check. Once the deal closes, investors will expect a long-term relationship.

Early-stage fundraising can deliver crucial capital to help founders expand their companies, develop new products and attract talent. But before seeking outside capital, founders need to answer some fundamental questions on how they plan to balance their immediate needs with long-term goals.

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At the 2025 Strategic Growth Forum®, investors representing three key providers of early-stage capital in the entrepreneurial ecosystem participated in a panel discussion: a venture capital firm, an angel investor network and a corporate venture capital group. While they typically focus on different areas when making investment decisions, they all agreed that founders need to ask crucial questions to align their search for outside capital with the long-term goals for their company. Here are some of their key takeaways:

 

1. Investors are more interested in companies with a long-term vision than those seeking short-term profits.

 

Trevor Loy, Managing Partner for Flywheel Ventures, emphasized that venture capitalists are looking for high-risk, high-reward investments that have a compelling value proposition and the potential to transform an industry. “We cast a very wide net in looking for startups, with the expectation that not all will grow into successful companies. Our hope is that one of those will become successful and fund our other investments,” Loy said.

 

Angel investing groups, such as Golden Angels Investors, and corporate venture capital teams for Fortune 500 companies like Caterpillar also prioritize a company’s long-term plans. Mary Hannes, Director for Golden Angels Investors, said that her firm emphasizes founder quality and market potential, while Craig Lange, former Vice President of Corporate Development and Strategy for Caterpillar Inc., said his primary goal is to find a company or founders who are building excellent technology.

 

2. Once they take outside capital, founders will no longer have full control of the company.

 

After they sign the paperwork, founders need to realize that others will have a say in the future of their business. “When you take an equity investment from anyone, your mindset has to shift, because it’s not just your company anymore,” Lange said. “We all own a piece of it, and you have a legal fiduciary responsibility” to the shareholders that goes beyond your management team and employees.

 

Most investors will also want a seat on the board, although the extent of their participation will vary. Some may want just an observer seat, while others will demand one or two full seats. Investors will also expect status reports, ranging from weekly calls to quarterly check-ins.

3. Founders are not just getting a check; they are starting a long-term relationship.

Signing the term sheet with an investor is just the start. “Before we write the check,” Hannes said, “we need to make sure the company is a good candidate and that we’re compatible. This is like a marriage.” Investors want to understand the company, learn about potential headwinds and understand the thinking around long-term growth. Hannes added that she and most angel investors “want founders who are in love with the problem. That’s the drive, the motivation that will be enduring, even if the solution has to morph and change over time.”

4. Investors are busy, so prepare your pitch carefully.

Lange notes that many investors face increasing demands on their time from a wide range of startups and existing venture capital-backed companies. While capital is relatively free to us, Lange said, “what’s not free is our time. We only have so many slots for portfolio companies that we can invest in. And if I pick you, you’re using up one of those slots.”

To that end, Caterpillar’s corporate venture team vets companies carefully. And given their priorities, that means they tend to avoid companies seeking profitability right out of the gates. “We want companies that stay focused on what we want them to do, which is building great technology,” Lange said.

5. Don’t worry about valuations as an early-stage company.

Founders often spend an inordinate amount of time worrying about their company’s valuation, Loy notes. Most early-stage investors recognize that in subsequent funding rounds, their initial investment will be diluted. At this early stage in a company’s lifecycle, the absolute value of the valuation is less important to venture capital firms than the percentage of ownership that they’re getting with their investment.

“This seems odd to entrepreneurs who care so much about what’s on paper, but we can’t sell your company or our stake in it for another seven to 10 years” until it’s ready for an exit, Loy said. He added that his firm invests in a broad range of startups, anticipating that only a select few will pay off, which is one reason why they are flexible on the initial valuation.

Summary 

Early-stage fundraising requires founders to rethink their role, as bringing in investors means sharing control and taking on new responsibilities. At this stage, investors are more concerned with a company’s potential for long-term growth and technological advancement than its initial valuation. Founders should focus on choosing the right investors, preparing thorough pitches and building strong ongoing relationships, as investor involvement often includes board seats and regular progress updates. The emphasis is on compatibility, vision and a passion for solving meaningful problems, rather than immediate financial returns.

About this article

Photographic portrait of Jeff Leach
Jeff Leach
Executive Director, Private Equity, Ernst & Young LLP
Strategy, transformation and M&A advisor. Dad to twins. Yoga practitioner. Runner. Advocate for the ethical treatment of animals.
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Entrepreneurship
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