The word “startup” conjures up visions of innovative ideas, brilliant people and thousands of dollars in venture funding. While all these things are part of the process, they each have pitfalls that can result in significant time, money and effort wasted. This guide will better understand what startup funding stages look like and where you should go next in your startup planning process.
A seed round is a funding round that provides the startup with money to get off the ground. The money comes from angel investors, and it can be anywhere from $50,000 to $500,000.
The distinction between bootstrapped and pre-seed rounds is significant. In both cases, you need an investor who has already invested in your company before this stage, so if you have no other revenue coming in because nobody has hired yet or made any sales, it might not make sense for them to invest in such a small business!
Angel investors are people who invest in early-stage companies. They can be either anonymous or known, based in the US, Europe or Asia, and come from any industry. Angel investors have a high level of trust because they’ve built successful businesses. They know what it takes to get a company off the ground and keep it running smoothly throughout its lifespan, something you may not have had time to learn!
Venture capital is an investment intended to fund startups and early-stage companies. The people who make these investments are sometimes referred to by this phrase. Venture capitalists are typically investors with deep pockets and access to capital; they provide money in exchange for equity, which gives them a stake in the company’s success or failure (and, therefore, their return).
The first step in getting venture capital is finding an investor you want to work with. You’ll need someone who has enough experience, but not so much that it’s overwhelming; someone with great contacts at banks, law firms and other institutions; someone who can help guide you through your startup journey as well as manage its risks while making sure everything goes smoothly along the way.
Once this person has agreed on terms with you (typically involving funding rates), they’ll begin making introductions within their network of contacts in order to find other potential investors interested in partnering up with yours too!
Getting Funding is Not Enough, You Need to Understand How to Use It.
When you’re getting funding, it’s essential to understand how that money is going to help you get from one stage of your business to another. If the money is being used simply as seed capital and then plowed back into your company with no clear direction or purpose, it’s not working as well as it could be. If you need funding, use it to:
Grow your business: This is the most common reason people ask for money when starting a business. You can use investors’ money to hire more employees and expand your operations as needed.
Finance your business expansion (or even growth): Suppose you have an idea for an additional product or service that could benefit from additional funding. In that case, this is another good reason why venture capitalists will want to fund your company’s growth plans, especially if it’s something niche enough that other investors might not be interested in backing up their investment dollars with theirs (which could put them at risk of losing out on future profits).
A startup funding stages flow chart will either save you time and money as you plan your startup, or it can help you lose a lot of money and time if you don’t take the time to plan correctly. In other words, spend the time planning your strategy so that when you get the funds to start your startup, it’s more than worth it.