Start-Up Funding!🚀🚀🚀
Ever wondered what is the fuss all around seed funding for start-ups?
Let us do a quick dive into what they mean in general.
Start-ups go through different stages in their life cycle and as they go through the same they look for financial assistance to sustain, innovate, or find customers to acquire for growth.
The different stages include :
1️⃣ Pre-Seed/Seed Rounds:
Why: Initial funding is to develop the concept, conduct market research, and build a prototype
Who: In general at this stage the seed funding comes from founders, their network, friends, family, and at times Angel Investors
Funds: The amount is generally smaller in comparison to other rounds
2️⃣ Series A :
Why: Start-ups use series A funds to scale the business having a concept in the seed stage (Expand customer base and improve product offerings)
Who: Venture Capital (VC) firms usually lead the way in Series A rounds along with a few Venture Capitalists
Funds: Generally the trend is to see much higher capital from the seed stage as the emphasis is on initial customer acquisition
3️⃣ Series B :
Why: This funding is to assist the start-up in growing and gaining a stronger market position. They generally expand their team, increase marketing efforts, and develop their products or services
Who: Venture Capital firms are the major contributors, earlier investors are also welcomed
Funds: Series B is generally higher in numbers, signifies start-ups’ progress and growth
4️⃣ Series C & Beyond:
Why: Further rounds like C, D, and E are focused on scaling the business, entering into new markets, or at times preparing for an exit or IPO
Who: Institutional Investors, Private Equity Firms and at times corporate investors also participate in late funding rounds
Funds: The funds keep increasing based on the rounds and potential growth expectations
5️⃣ IPO (Initial Public Offering) :
Why: IPO is when a start-up goes public i.e. its shares are opened to the public for the first time.
It lets the start-up to raise capital from a much larger investor base
Who: The public can buy shares of the company on stock exchanges
Funds: The amount raised in IPO varies significantly based on the valuation of the start-up
6️⃣ Acquisition :
Why: Instead of going public a few start-ups can exit via acquisition by larger companies. This provides amazing returns to the founders and investors
Funds: This can involve cash, stock, or a combination
Check how Slack went about its funding and got acquired by Salesforce
Note: Not all start-ups take a similar route. It completely depends on their scale of operations, industry, market, business model, and growth trajectory.
Each funding round requires strong negotiation on valuation and start-ups need to keep presenting their case based on their value proposition to fit in the bill.
They must have tremendous belief in the execution plan and growth potential translation to revenues.
#StartUps #Seeding #Funding #Growth #ProductManagement #KPKR
