A company requires more than simply an idea; it also demands a significant amount of time and effort, devotion, concentration, and, of course, funding. More than 60% of all startups require outside funding. When it comes to raising funds, you must be aware of the difference between various funding rounds and investor kinds. Investment rounds fall into three categories:
- Pre-seed/ seed
- Series A, B & C
Pre-seed funding is round when founders try to get their idea off the ground and are willing to put their own money into it. The seed stage follows, in which innovators seek out so-called angel investors. Additional research, market testing, the hiring of a team, and the start of production are all funded by these individuals. Depending on their demands and presentation, tech businesses can strive for investments ranging from $500K to $2 million at the seed stage. Investors are willing to take chances and frequently invest in many firms. Those who make it thoroughly, receive additional funds.
Series A is the next round of the series. It is primarily focused on businesses that have a proven business plan, a sizable client base, and are financially profitable. At this point, investments can start at $3 million and require a specific approach to achieve a higher return on investment. Venture capital firms are investors in this area, and they typically require entrepreneurs to provide original data and development from past investments. They want to see the firm grow into a profitable cash machine that can scale and advance to the next level.
Series B program assists entrepreneurs in becoming businesses. They’ve reached a point where they’ve matured, have a significant user base, and are asking for VC funding. At this point, investments might range from $10 million to $65 million (Mixpanel raised $65 million in series B). This stage focuses on growing the staff and expanding into new markets.
Increasing the number of rounds to C signifies a higher level of expansion. The companies are already profitable, with a market capitalization of $100 million or more, and are looking for equivalent funding. During round C, the current capabilities of projects get enhanced and introduce new products.
The process of opening a private company’s shares to the public is known as an initial public offering (IPO). It is the ultimate step in a startup’s life. A large amount of capital is now available on the open market, as well as a new level of transparency.