Startup Funding – stages of funding
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Startups
Every startup requires a fund to turn ideas into live products. A startup can continue operation only after it gets the requisite funding to manage operations and grow its business. The following articles will help to stages of the funding process clear. Startup Funding – stages of funding
Startup Funding
The startup funding can be following types:
Equity Finance
A startup can raise finance by diluting its equity structures. Investors can be part of the company as a shareholder. They will access dividends and gain/loss from the fluctuation of the share price. Equity shareholders are not allowed any fixed interest commitment on the capital provided.
Debt Finance
The startup will issue debt instruments to raise money from investors. Debt would allow the investor to fixed interest payout as a security agreement. Further, debt may be convertible to equity on the trigger of certain events defined in the agreement.
Stages of Startup funding
The startup undergoes the following stages of funding:
Bootstrapping / Self-funding
Startup founders should ascertain how much they can contribute towards the capital. This is ideal for a startup that requires little funding at the start of business.
Pre-Seed (Idea)
Pre-seed capital infused to work on the idea stage of the startup. This amount to firm up & validate the idea, complete proof of concept (POC).
Seed Stage
Seed capital at the initial stage of funding. This fund is used for identifying customer inclination towards startup product & services, and fine-tuning the same at the earliest.
Series ‘A’ round
Series ‘A’ investment is the 1st round of funding. The startup works to formulate the product and services. This money is used for marketing, geographical expansion, and growing the business.
Series ‘B’ round
Series ‘B’ investment is used for manpower resources, incurring operational expenditure, and developing infrastructure.
Series ‘C’ and onwards
Series ‘C’ investment and onwards can continue depending on the startup. More series would mean more dilution of capital.
Initial Public Offering (IPO)
Initial Public Offering (IPO) is the fund raised from selling shares to public and institutional investors. IPO is commonly referred to as going public. Compliance norms increased drastically once public money is invested.
Key points to raise fund
The startup should keep finance resources with a strategic bent of mind to drive the process of funding the startup.
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