Funding Decisions and Raising Capital

How to learn with this guide

1. Read each explanation, then repeat the worked example without looking.
2. Follow the three-step method aloud and answer the check.
3. For feedback and a reworded attempt, return to the interactive lesson.
4. At the end, explain how the idea applies to your own industry.

LESSON 1 OF 4

State the use of funds

Outcome: Separate purchase price from the working cash needed to execute a plan.

Concise briefing

A funding request starts with a dated uses-of-funds schedule, evidence for each cost, and a reserve for operating uncertainty. Raising a round because a headline number sounds impressive can create avoidable debt or dilution.

Worked example

A distributor needs $60k for inventory, $20k for equipment and $15k for seasonal payroll timing: $95k before contingency. The founder checks quotes and cash receipts before choosing a funding amount.

Repeatable method

1. List each use with a quote and date.
2. Model receipts against payment dates.
3. Size a realistic reserve and test a downside case.

LESSON 2 OF 4

Compare debt and equity

Outcome: Identify cash repayment and ownership dilution as separate tradeoffs.

Concise briefing

Debt normally has repayment terms, cost, and covenants. Equity gives investors ownership and can affect control and future proceeds. Neither is automatically cheaper. Model downside cash and use qualified advisers for actual documents.

Worked example

At a $900k pre-money valuation, a $100k new equity investment implies $1m post-money and 10% ownership for that investor, assuming no other terms or dilution. A $100k loan avoids that immediate equity issuance but adds repayments and lender terms.

Repeatable method

1. Model debt payments under a low-sales case.
2. Calculate ownership from actual pre- and post-money definitions.
3. Compare control, total cost, timing, and flexibility.

LESSON 3 OF 4

Recognize securities rules

Outcome: Flag an investor offer for legal review before public promotion.

Concise briefing

Selling an ownership interest can involve securities laws even for private companies. The offering must be registered or qualify for an exemption, and solicitation rules depend on the pathway. An internet post inviting investments is a legal review event, not ordinary product advertising.

Worked example

The founder drafts a public post: ‘Invest $10k for 2% of our company.’ Before publishing, counsel evaluates the proposed security, offering exemption, investor eligibility, disclosures, and state requirements.

Repeatable method

1. Identify whether the proposal gives an investment interest.
2. Review the contemplated exemption and solicitation restrictions.
3. Obtain securities counsel review before outreach or funds.

LESSON 4 OF 4

Protect runway and reporting

Outcome: Tie funding milestones to cash forecast and investor or lender obligations.

Concise briefing

Cash runway is the time until available cash can no longer cover outflows under stated assumptions. Funding terms may require reporting, use restrictions, or covenants. A beautiful forecast does not replace actuals; revise monthly and report honestly.

Worked example

A company holds $120k unrestricted cash and projects $20k net cash use per month. Simple runway is six months if that burn stays constant; a later $45k inventory payment shortens the real dated runway.

Repeatable method

1. Forecast cash by week with actual due dates.
2. Read covenants and reporting requirements.
3. Reforecast after material changes and communicate deviations.

Final review

Close your notes and answer these in the interactive course. Revisit any missed lesson before attempting the reworded check.

1. Which document comes before selecting a funding source?
2. What does a public invitation to buy equity require?
3. What can shorten cash runway despite unchanged monthly average burn?

Use it in your setting

Replace one fictional example with facts from your field. Name the decision, evidence needed, and the first assumption to verify.

All examples are educational. This printout does not create a verified grade, enrollment, or credential.

Sources and further reading

Original Aim High Hero explanations and fictional exercises. External sources do not endorse this course.

• U.S. Securities and Exchange Commission — Capital-raising building blocks
• SEC — Offering pathways
• SEC — General solicitation
• SBA — Grow your business