August 22, 2019
5 min read
SeekWiser has laid down a guide to the different stages of startup funding, and when can you approach potential investors.
Irrespective of the experience, industry, domain, or a startup's age, entrepreneurs need funds to sustain their startup and keep the startup's functions running without any obstacles or financial crunches. There are various stages of funding that a startup goes through - right from the ideation to the ultimate expansion, a startup needs funds to survive and accelerate its growth.
Knowing about the different stages of startup funding can prepare entrepreneurs for what lies ahead and how to efficiently manage the startup's funds until the next round of funding. Understanding the startup funding stages can also provide you with the right guidance on when to approach the investors with confidence for a sure shot at raising funds.
SeekWiser has laid down the different stages of startup funding, and when can you approach potential investors:
Bootstrapping: Bootstrapping is the first stage of startup funding as it involves the contributions made by founders from their own pockets. It is also known as self-funding 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 raised from friends or family of the founder as there are minimum documentation and procedures.
Seed Capital: Seed Capital is the preliminary funding raised by a startup from outside sources. When the business has identified its product or services and has the path set for it for the next quarter, the startup may offer stock to friends or family. It is the stage when initial startup valuation is done, and the investors have all the details about the potential customers, demand and supply for the product or service, and the risk involved in the business. It is pertinent for a newbie startup to seek guidance from startup consultants at this point as a startup mentor can help the entrepreneur in preparing in advance to raise a more significant amount of seed funding.
Angel Funding: Angel investors are wealthy individuals outside the friend and family circle of an entrepreneur, who invests in the startup and gets preferred shares in the business. Angel funding is a considerable amount when compared to seed capital and also marks the involvement of investors in the company. Founders and investors need to match their vision for the business and angel investors get a substantial say in the functionalities of the business.
Venture Capital (VC) Funding: This is where things get much more severe as this is the stage of startup funding when the product or service of the business has reached its target audience, and the company is generating some revenue. Venture Capital Funding is divided into a series, or rounds of funding:
Series A: Series A funding is the first stage of VC Funding of a startup. Series A funding is usually raised for advertising and marketing the product or service of the business, improve brand quality, retain more customers, find new markets and reach more potential customers. Startups may consult a startup consultant in India about joining an accelerator and extending their network for finding venture capitalists.
Series B: Series B funding 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 employees, expanding the infrastructure, and even reaching the global markets.
Series C: The primary goal of Series C funding is to scale the business rapidly and double the investment made in the business. Series C funding is raised when the startup valuation has increased visibly. Venture Capital can continue into Series D, Series E, Series F, Series G funding, and so on.
Initial Public Offering or IPO: Initial Public Offering or IPO means going public. IPO comes into picture when the startup decides to go public and raise funds by offering company shares to the common public. The process of IPO is complex and involves intricate legal procedures with the SEBI.
Startup funding is a complex maze, and new entrepreneurs need to understand the different stages of startup funding well in advance to know what they have in future and plan better for the business. When the entrepreneurs lack the required know-how or are looking for guidance about fundraising, they shouldn't hesitate from consulting startup experts to get the right solutions and clear their doubts.
SeekWiser has an extensive network of the best startup consultants in India who can assist the business is getting the right mentorship and guidance about the different stages of startup funding and planning for fundraising.
Read our comprehensive yet simple online resources and guides on startups, technology, finances and entrepreneurship.
© 2020 SeekWiser. All rights reserved.