In order for your startup to grow, moreover, unless you are Jeff Bezos, you have inevitably going to need to look at how you get startup funding. Over a decade, there has been a huge surge in the amount of Venture Capital that is available for all stages of the startups.
But do you know your seed to grow from your Angel to Series funding?
If not, then you don’t need to worry. We will guide you through the different stages of startup funding so that you know where you are, and what you can expect down the line.
Bootstrapping is the first stage of startup funding as it involves the contribution which is being made by the founders from their own savings. It is also known as self-funding part as the primary source of funds is the entrepreneur.
Bootstrapping kickstarts the basic operations of a startup and allows the entrepreneur to turn their idea into a reality. Funds at this stage may also be secured from friends or family of the founder as there is less number of procedures and documentation.
Seed capital is the startup funding secured by a startup from the outside sources. When the startup has identified its product or services and has the path set for it for the next set of quarters, the startup then may offer shares to the family or friends.
It is a stage when the initial startup valuation is done, and the investors have all the details about the potential targeted customers, and the risk factor involved in the startup too. It is pertinent for a new startup to seek some of the guidance from the startup consultants as it can help the entrepreneurs in preparing in advance to secure a more significant amount of seed funding.
Angel investors are the high net individuals outside the family and friends circle of entrepreneurs, who invest in the startup and gets preferred shares in the business. Angel funding is a huge amount when compared to seed capital and also marks the involvement of the investors in the company. Founders and investors need to match their vision for the business, and angel investors get a substantial stake in the functionalities of the business.
Venture Capital funding
This is where things get highly severe as this is the stage of the startup funding when the product or service of the business has reached the potential target audience, and the company is getting some revenue. VC funding is divided mainly into a series or rounds of funding:
Series A funding
Series A is the first stage of the VC funding. It is usually secured for marketing and advertising the product or services of the business, retain more customers, improve brand quality, reach more potential customers, and find new markets.
Series B comes after the product is well marketed, and there is sufficient demand for the product in the market. Series B funding helps the startup in hiring more experienced people, reaching the global markets, and expanding the infrastructure.
The main goal of the Series C is to scale the business at a faster pace and double the investment made in the business. Series C round is secured when the startup valuation has increased visibly.
IPO (Initial Public Offering)
This is not the end goal for all startups. Moreover, if you have secured money through each of the previous stages, now going public into the marker is an option to scale further. All of the investors who have started their money for equity until this post will ideally recoup their investments along with some of the additional profit.
Some investors may even retain their shares, but don’t be surprised if many of them sell their stock at the beginning to reap the rewards of getting in early. After the launching of IPO, stock options for a growing company can be used to attract top talent, and increased access to capital can provide resources to push the momentum of your business forward.
We hope that you found this article helpful, and we believe that if you are a startup entrepreneur, it is essential to know the different stages of startup funding. This will not only help you to secure funding for your startup in time but also helps in planning out the entire funding process for your startup.