Every day we are bombarded with different startup terminologies, bootstrap, series A funding, and a tonne more.
What do these essentially mean and at what stage in their development would a startup require each of them?
Let's take a look at a quick Startup Funding Guide:๐งต
What do these essentially mean and at what stage in their development would a startup require each of them?
Let's take a look at a quick Startup Funding Guide:๐งต
1. Bootstrap
Bootstrap is essentially Self funding your startup during its initial stages. These are funds you can scrape together, from your own pocket, or from your relatives, friends or co-workers.
Bootstrap is essentially Self funding your startup during its initial stages. These are funds you can scrape together, from your own pocket, or from your relatives, friends or co-workers.
You may gather the money at a very low rate of interest, and face few complexities in documentation.
2. Seed funding
This is the first round of funds from external sources. Seed/Angel investors are like initial supporters willing to invest in an idea and/or a prototype. The company may or may not have an established market yet.
This is the first round of funds from external sources. Seed/Angel investors are like initial supporters willing to invest in an idea and/or a prototype. The company may or may not have an established market yet.
This funding is used to develop the product or service. Companies can go through any number of seed rounds.
3. Series A funding
Once your company has an established market as well as proof of good revenue, (what investors call "traction,") you can get Series A funding.
Once your company has an established market as well as proof of good revenue, (what investors call "traction,") you can get Series A funding.
This is where you are dealing with Venture Capitalists who may invest large amounts of money in your company in exchange for stake or partial ownership.
Investment can go into millions of $$$.
Investment can go into millions of $$$.
4. Series B & Beyond
Fundraising in Series B, C, D... can be endless as long as your company has growth opportunities. This money is used to improve brand credibility, open up new markets, and grow the business.
Fundraising in Series B, C, D... can be endless as long as your company has growth opportunities. This money is used to improve brand credibility, open up new markets, and grow the business.
Each round typically raises more money the previous round. Venture capital investors may also set a timeline for when they expect to exit, or cash out, of your business.
5. IPO
If your company gets large enough to outgrow the funding capabilities of institutional investors, it can go public with an initial public offering (IPO).
If your company gets large enough to outgrow the funding capabilities of institutional investors, it can go public with an initial public offering (IPO).
Basically, the general public can now invest in the company by buying shares. An IPO helps the company grow and diversify in areas of their choice.
What else do you want help making sense of?
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