What is Startup Funding:
To keep the lighting on, the staff happy, and the movement continuing, you need money, whether you're in the startup process. Raising capital may not be on your list of goals when you first started your business, but your capacity to do so will have a significant impact on its future growth. No matter what kind of business it is or how big it is, every startup needs money to make its unique ideas a reality. The inability to acquire adequate capital is a significant reason for company failure for most companies. As a company owner, you need money or capital every step of the way. As a startup novice, you must familiarize yourself with these steps before you can begin the process of obtaining funding.
Different Stages of Startup Funding
- Seed Capital
Your startup's first round of funding comes in the form of seed cash. The Banks of friends and relatives, crowdsourcing, credit cards, and your own money are all possible options. There is no such thing as "free cash," and investors should know exactly what they're getting out of their money. Your business and your ability to develop and present your solution to prospective investors are both supported by accelerators.
- Funding by "Angel Investors"
You could turn to angel investors as a solution if your startup's demands grow and you need to scale or raise capital for product innovation, advertising, or just expanding your staff to maintain momentum. By this point, your startup's business model should have been validated. As determined by the SEC, at least a million bucks in total wealth and at least two hundred thousand dollars in yearly income are required to qualify as accredited angel investors. They have the option of investing singly or in combination. Investors will also be looking for a compelling and well-researched proposal at this level because the funds collected may be substantially more than in the seed round.
- VC Funding (Venture Capital)
Funding from venture capitalists may help a company grow to serve new markets or target specific sectors of its existing client base. By now, your firm has either turned a profit from this fresh round of funding or continues to expand. Venture capitalists aim to invest their customers' money in enterprises expected to provide a considerable return on their investment. Venture capitalists routinely vet startups, so be ready and engaged when you present to them.
- Bridge Repayments
You're ready to take your company to the next level with a commercially viable product. Even though the firm isn't currently successful, it should regularly generate revenue. At this stage, the money collected will be used to expand into new areas, combine with another company, or prepare for an initial public offering (IPO). In the early stages of investment, investors are looking for a clear path to profitability. Bridge finance, for example, might pay the costs associated with an IPO. The bridge investors get repaid with interests from the IPO's proceeds.
- Initial Public Offering
Not many startups have this as their ultimate objective. Making it public is possible if you've already collected money via the preliminary phases. We hope that every investor has made a profit from trading their money for shares up until this point. Don't be shocked if several investors invest their money at the start to enjoy the benefits of being in early. To recruit the best employees and boost your company's growth, stock options may be used after an IPO, as well as the extra money that comes with it.
Important Points: Conclusion
There has been a dramatic growth in startup enterprises since the dawn of the digital era. Starting a business may be a rewarding venture for those who achieve it today because of this tendency. To successfully engage investors, you must have a thorough awareness of different demands at each step of the financing process.