You are a startup with an amazing idea, a great team, and plenty of drive, and now you need funding. Learning how to complete the funding rounds required to take your startup to the next level may seem complicated, but it’s not. Here we will explain in straightforward terms what funding rounds are and why you need them for your startup.
Funding Rounds Explained
Funding gives you the capital you need to scale your startup and gives you access to investors who can provide valuable guidance and experience.
Every great idea needs funding. A funding round is when startups raise capital to help develop their business. There are several stages of funding rounds that scale up as the business grows.
A funding round requires investment, which means drawing up business agreements, legal contracts, cap tables and more.Using third parties to help is a worthwhile consideration because you’ll want things to go as smoothly as possible when it comes to getting your investments.
The first steps are valuing your company and deciding how much money you need to raise. Next, you must think about who would invest in your business so you know what type of investors to speak to. There are a few options, including venture capitalists and angel investors. The next step is pitching to investors, which is what will set you apart from the competition. Your pitch deck will give a comprehensive overview and presentation of your start-up and the team behind the idea. Preparation is key to successful funding rounds and having a well-prepared pitch deck is vital.
Do your homework and learn from other pitch decks what works and what doesn’t work in order to pitch and secure funding successfully.
- Research how to best present to investors and what difficult questions you will need to have answers to.
- Demonstrate how your idea or product meets a need and what makes it innovative, with a clear vision and future goals. Backing your pitch up with solid data and key metrics is essential.
Timing is critical when it comes to funding rounds, and many founders make the mistake of waiting until it is too late to start fundraising. Funding rounds take your startup from the stage of development, testing, and research to a fully-fledged functioning business so you need to do them early on to gain momentum.
Types of funding rounds
There are different types of funding rounds based on the stage of growth a company is in. These include:
- Series A B, C, etc.
The pre-seed funding stage is the point at which you use your own assets and resources to launch your startup. Usually, at this stage, investors are yourself and your co-founders, and often your family and friends who believe in your idea too. The amount of investment at the pre-seed stage is usually around£50,000. During the pre-seed stage, you are developing your idea or product, testing the market, and building a solid business plan and team.
When your product ready to launch, you get to the seed funding stage. This is when you will start looking to angel investors or venture capital investors to help launch your product, or service in the market. You’ll also start recruiting more team members. .
After seed funding, you enter the Series A and up rounds. As your business scales, you enter into each next series.
The first Series A funding round comes after you have launched your product or service and you are ready to further accelerate startup and develop your service or product. As your business grows and its valuation increases, you will then move forward with Series B and C rounds, which take place as you have proven success and increased your revenue. At this point, your business might decide to go public, taking you to the initial public offering or IPO stage.
Now that you have a clearer idea of funding rounds, start building your business plan, pitch, and timeline to grow your idea and take it to the next level.