Part 3: The First Capital Raise

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A NZ founder’s guide to raising capital, comparing priced vs unpriced rounds (SAFE/notes), post-money SAFEs, and legal investor rules.

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Disclaimer: This content is not legal advice. It is general commentary designed to help founders get their heads around key legal concepts, decisions and risks - but it doesn’t account for your specific circumstances.

Every startup is different, and the right approach will depend on your unique situation. If you’re making important legal decisions or signing anything binding that you are unsure about, talk to a lawyer.

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A few founders manage to go it alone (aka “bootstrap”) by building their startup without raising external investment. That might mean relying on personal savings, government grants, customer-funded projects, work-for-hire gigs, or even bank or venture debt. If you’re bootstrapping all the way, hats off to you.

But for most founders, there comes a point where external equity capital is needed to go further or move faster whether that’s to build the product, hire a team, launch into new markets, or accelerate growth.

1. The Hustle V The Legals

Think of capital raising in two broad parts:

Part 1: The Hustle (aka The Sale)

Before you even think about term sheets or legal docs, you need to get clear on the why, how much, and who from. This is the commercial heart of your raise, and arguably the most important part.

You should be asking:

Why are we raising now? What will we use the funds for, and will it get us to the next milestone or proof point for the next raise? Capital raising is rarely one-and-done - even if you have sales, chances are you’ll want to make the waka go faster.
How much should we raise? Enough to get to that next proof point, plus some contingency so you don’t run out of gas on the way. Raising when you’ve fallen short isn’t a strong negotiating position. But don’t raise so much that you over-dilute or waste time chasing more capital than you actually need.
Who are the right investors for us? Not just “who can invest,” but who should. Think beyond the money: who brings expertise, networks, credibility, or future funding potential?
What will life be like post-investment? Are you ready for reporting, governance, and accountability? Is this the type of investor you want to take into your boardroom?

Unless you're already a well-known quantity with investors lining up (and if so, you’re probably not reading this), you'll need to hustle:

[ ] Craft your pitch and iterate: What problem are you solving? How much are you raising? What will it unlock? Then review and refine it (a minimum of 20 times in our experience)
[ ] Define your investor universe: Angels? VCs? Funds with a NZ focus? It depends on your stage, sector, and target round size.
[ ] Narrow the list: Who do you actually want on your cap table?
[ ] Pitch, pitch, pitch: to the dog, to the cat, to friends, to club managers at Angel clubs, and to investors (in that order)

This is non-legal, non-theoretical, and often make-or-break. Getting this part right builds your network, clarifies your vision, and sets you up to negotiate from a place of strength. Think of it like a sales process. Just like selling your product, you need to clearly define your value proposition, and why someone should part with their cash to back your venture.

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Part 2: The Legals (Aka The Close)

Found someone who wants in? Great - that's most of the battle. Now comes the paperwork and structure. The first two core questions are: