Every startup that has ever come into existence always needs assistance with funding or financing its business. Startups worldwide are becoming more common, and many people are now interested in starting a business instead of working in a company.
But finding the funds to commence a startup is a difficult task. Not everyone has enough money to take on a business at the outset.
This is why knowing the various means of finding funds, the various startup funding stages and the areas that will require funding in the lifecycle of a business is something every startup entrepreneur must be informed about.
When a person knows what to look for and where to look for it, the task of acquiring something becomes more possible. For an entrepreneur knowing where to look for funds is as important as knowing how to do business.
Stages of Startup Fundraising
There are many stages of conceiving and successfully running a business. To start with, there must be an idea, then the idea must be backed with research and market study, then the idea becomes a product or service, and a business plan is established around it.
After this, the production process and the service’s setting happen, and the business starts to build around it. Like there are many stages to a business, there are startup funding stages as well, in which the entrepreneur needs to fund the startup at regular intervals based on how the business proceeds.
This helps in taking the business forward and helps to establish the startup as a fully functional business entity.
There are several types of funding for startups – It could range from types of investors to many different kinds of loaning institutions such as banks, private lenders, and pooling of money by various organizations. All of these types of funding can be excellent sources for an entrepreneur to tap into.
Below are some of the stages involved in financing or funding a startup:
Initiation or Seed Stage
The initial stage is to fund the idea or concept to become a business. In this round of funding, the funds are usually invested by the investors through their own money or borrowed from friends and family. This money goes into developing the idea and the product based on the idea.
In this stage, the entrepreneurs complete their business plan using the research data they collect from the market intelligence they have gathered. Investment at this stage can be acquired from Venture Capitalists or Angel Investors who can be convinced to fund the business.
In this round of funding, the investment is mainly required to start the production and towards marketing the product, creating ads that are targeted to the audience, and to further improving the capacity at each level.
Series B, C, etc.
The expansion of factories, entering new markets, and product development can happen in the subsequent series of funding. Investments can be acquired from Angels, VCs, or small lenders or banks.
Within this, there are several stages of Venture Capital financing based on how much investment is required. The stages of Venture capital funding help in improving the business and expanding it in a global manner in the final stages.
The final round of funding goes towards making the company public, and investors can sell their shares.