Venture capital financing is often a good choice for businesses that have big goals and a lot of room for growth but need a little extra money to put their plans into action.
It can also be very important for businesses that can’t get money from traditional lenders and entrepreneurs who want to start a business quickly.
If you want to get money from an outside investor in exchange for a share of your business, these are the steps you need to know:
Before the seed stage
Getting money to start a business is a long process that many businesses go through at the start. The pre-seed stage is when you’re just getting started and you need money to pay for your start-up costs. Then, some people don’t think this phase is part of the whole venture capital financing cycle, because it may not involve a lot of commitment from other people.
Early in a company’s development, the main funders are likely to be the founders or close family and friends who want to help get the business off the ground. These people might also be willing to help out.
The amount of money you need at this point depends on the nature of your business and the costs you have to pay to run it. If you can start a business with little money, you can move quickly through the pre-seed stage and move on to the next phase.
This is when you start to think about getting more money in exchange for a share of your business. The seed-stage gives you the chance to get the money you need to pay for things that will help your business grow and make money, like:
- Conducting more in-depth market research
- Research and development of new products
- Getting more people to work
While friends and family who have money to invest could still be a part of this stage, seed funding is likely to come from bigger backers who can help you grow. Venture capital firms and angel investors are two common sources of seed money. Angel investors might be able to make a big one-time investment to get a share of your business.
Investors and the nature of your business will have a big impact on how much money you can get. The seed funding stage is usually when you can start thinking about getting money in the millions.
The funding for the first season of the show was not enough
Series A funding is the next step after you have a history of success and show that your business can grow even more and make more money for investors. It’s usually given to businesses that are making money but aren’t yet profitable.
Seed funding can be secured based on projections and investor evaluations of the potential of your venture. To get series A funding, you’ll need to show clear evidence of performance, so you’ll need to be able to show that your business is working. This could be:
- The amount of recurring revenue each year
- People who already know each other and trust each other.
- Proof that people want your product.
Between $2 million and $15 million could be raised during Series A rounds, which could be very important if you want to expand your product line or launch in new markets.
The Series B funding came in at number
Once you get to the series B level of funding, your business is well and truly done with development and has a proven product or service that can be used on a bigger scale. As well as having steady sales, you should also be looking to make money.
Series B investors can help you get the money you need to make your dreams come true by expanding your market reach.
A company can usually get anywhere from $7 million to $30 million in new money at this point in venture capital financing. This can help pay for things that are important for the future, like:
- Acquiring the skills and talent you need to improve your workforce
- A more aggressive business plan
- Increased ability to sell
- People who work with technology are here to help you
The funding for Series C
As soon as a company reaches the seed or series A stage of funding, it will already be a successful business. It has already established a strong position in the market and delivered a big increase in value to its backers.
From a venture capitalist’s point of view, a Series C investment is usually a safe bet. This is because the company has already shown that it can make money and be successful.
One of the most common reasons for businesses to need money at this point is if they want to buy another company, which could be a smaller competitor in their field.
This round of funding can also be used as an exit point for venture capital investors, or as a chance for the business to improve its value before it goes public.