Different stages of Startup Funding
Every startup, irrespective of its nature and size of operations, requires funds to convert its innovative ideas into reality. Most of the businesses generally fail because of their inability to raise sufficient funds. After all, money or capital is required to keep the business going at every stage. The ultimate secret to progress towards a successful startup lies in knowing the strengths and weaknesses of your business. Also, overcoming the obstacles your business faces along the journey is the key to getting help from the right people at the right time.
If you are new to the world of startups and have no idea about raising funds, then you need to make yourself familiar with these different stages first.
An entrepreneur should decide the amount he/she is willing to contribute from his/her own pockets. This is crucial since you are keeping your hard-earned money on stake, take your time and assess your savings kept in multiple accounts or any investments that you made. Ask your friends and relatives to help you and this way you have liability as well. This liability keeps you going and work as a motivation booster.
As the name implies, it is the investment made at the primary stage of your startup. Seed capital is used to give a specific direction to your business. To know your customer’s preferences, demands, tastes, and behaviour, you need a certain amount. After getting the insights into customer behaviour, the right product or service strategy is formulated, which takes the business to heights. Most of the entrepreneurs raise this seed capital from friends and family.
The venture is when your products and service go live and reaches the audience. Regardless of the profit, they are yielding to the business, venture capital is used to take the company further and involves multiple rounds of funding.
Series A investment is the first round of funding wherein startups have already formulated a plan for their product or service. This funding is mostly used for marketing and to improve your brand’s credibility, tap new markets and in business growth.
A business goes for a Series B investment when the marketing is done right, and the customers are actually purchasing the products or services. Series B is then used to pay salaries, hiring the required staff, make improvements in the infrastructure and taking the business globally.
This is the third round of investment where investors and the owners are pretty cautious. A startup can have multiple rounds of investments; every round helps the startup to grow and attract new customers.