Every business, regardless of its nature or scale, requires funding to turn its unique ideas into reality. The majority of firms fail due to an inability to raise sufficient financing. After all, money or capital is required to keep your firm running at all stages. If you’re new to the startup business and have no idea how to get financing, you need first become acquainted with these several stages:
An entrepreneur should determine how much money he or she can contribute out of his or her own pocket. Examine all of your investments and money in various accounts, and then approach your friends and relatives. This step entails fewer complexity and documents, and your friends and relatives may be willing to lend at a lower interest rate. If your startup requires a small initial investment, self-funding or bootstrapping is a good option.
Seed capital is an investment made during the startup’s early stages. This assists the company in determining and developing the best direction for their venture. The funds raised at this stage are used to learn about the customers’ wants, preferences, and tastes, and then to develop a product or service in response. The majority of aspiring entrepreneurs obtain this financing from friends, mentors, and family, while others obtain loans in exchange for common shares.
Venture capital finance enters the picture after the company’s final products or services reach the market. Regardless of the success of the products, every business considers employing this stage, which also includes many rounds of funding:
- Series A: Series A investment, being the first round of capital, does not seek outside funding. Startups have developed a clear plan for their product or service at this point. It is mostly used for marketing and increasing brand trust, as well as for entering new markets and assisting businesses in growing.
- Series B: When a business relies on Series B investment, it portrays that the product is marketed right, and the customers are actually buying the product or service, as decided earlier. Such funding helps a business in paying salaries, hiring more staff, improving the infrastructure and establishing it as a global player.
- Series C: There is no limit to the number of rounds of funding that a business can obtain. However, during the Series C investment, both the owners and the investors are wary about supporting this round. The more investment rounds there are, the more equity is released by the company.
IPO (Initial Public Offering):
An IPO occurs when a startup decides to raise capital from the public, including institutional and individual investors, by selling its shares (Initial Public Offering). Going public is typically associated with an IPO since the general public now wants to invest in your firm by purchasing shares.
If the founders decide to go public, they are not required to reveal their financial accounts. However, the company must disclose information to the SEBI regarding financial statements, the aim of acquiring funds, and so on. Basically, an IPO allows you to expand and diversify in areas of interest. You should identify which stage of funding you want to pursue and for what purpose if you want to take your startup to the next level. Such timely judgments can be beneficial to your company.