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Different Stages in Startup Funding You Must Know Before Setting up a Startup

Startup Funding

It doesn’t matter what is nature and operation sizes in your startup. Every startup needs funds to achieve a desire short-term or long-term goal. In most cases, startups fail when they fail in raising sufficient funds.

It is obvious that you need capital or money to keep your business on the board every stage. If you have just entered the world of startups and don’t have any idea about raising funds, you have landed on the right page. In this post, we shall discuss the different stages in startup funding so that you can convert your startup into a brand. Let’s read on.

Self-Funding

As an entrepreneur, before launching a startup or business, you need to determine how much amount you can invest from your own pockets. Assess all your fixed deposits, savings in multiple accounts, and ask your friends and family if they can support you. 

This stage doesn’t include major complications and paper-work. You can also ask your neighbors and your wealthy contacts if they can lend you some money at cheaper rates. With self-funding or bootstrapping, you can start sailing your ship. 

Seed-Capital

The investment that you make at the preliminary stage of your startup is known as seed-capital. It plays a major role in identifying and constructing a perfect path for your startup. Entrepreneurs use this capital to know the demand and taste of the customers and produce a product and service accordingly. 

While, generally, this capital is raised from the friends, family, and mentors, you can also take a loan to exchange a common stock. 

Venture

As soon as you launch your products or services in the market, you need to think about venture capital funding. In this stage, there are multiple rounds of funding that determine the result of launching a startup. Let’s know about these stages.

  • Series A Funding

As it is the first round of funding, it doesn’t need external funding. Generally, it comes after raising the seed-capital for your new business and is the major round of capital venture financing. While seed funding does not have anti-dilution provisions, Series A funding comes with these provisions. 

The major purpose of this funding is to ensure the continuous growth success of the business. This funding helps you reach new milestones, such as producing new products or services and attracting a new audience.

You should know that getting Series A funding is not a cakewalk, but you can attract investors by creating a proper plan. For example, as a founder, you should know all the parameters that VCs use to evaluate a new business. 

Parameters of evaluation could be the validation of the idea, the final product or service, customer, acquisition, traction, management system, etc.   

Read Also: Anthony Delgado and Sofia Stolberg join forces to Disrupt Puerto Rico

  • Series B

When you reach Series B investment, it shows that the product or service has launched in the market successfully, and the customers are actually buying your products or services. As it is the next step towards making your business successful, you need to hire more staff, improve your current infrastructure and expand your boundaries.

Therefore, Series B investment will help you establish your product in other states or countries and improve your business’s overall strength. 

  • Series C

You should know that a startup can have as many as rounds possible. In other words, there is no restriction on the number of rounds, but in Series C investment, owners and invertors keep cautions while funding investing in this round. 

The Bottom Line

You can also approach investors through the IPO method. An IPO (Initial Public Offering), you decide to raise funds from the public, including both individuals and public investors by selling the company’s shares. 

Therefore, investors play a major role in determining whether your startup will be successful or not. Before launching any startup, make sure you have investors or a proper plan to approach investors after starting a new business.  

References

https://www.ascentconf.com/

https://cleartax.in/s/series-a-funding-explained

https://www.fundz.net/what-is-series-a-funding-series-b-funding-and-more

Alexa Josh is a serial entrepreneur who has founded multiple successful businesses in the field of writing, marketing, design, software development, and more. Ever since graduating from the University of Mumbai, writing has become her thing that she passionately engages in daily.

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