How Series Startup Funding Works: Explained by Phases
One of the critical parts of starting a business is having the capital to back it up. There are many ways of funding startups that can potentially help you that you may not know of. No startup is the same; It is essential to choose the right type of funding, one that adjusts to your own startup – and you! For series startup funding it is essential to understand where your company stands financially and in terms of growth.
To know which one adjusts to your business, you have to think of having a Business Valuation. This will determine the value and worth of your company which is of great impact on investors. It considers the track record, profits unit then and the projected, the risk of investment it represents, market size, etc. Once the valuation is done, startups proceed to the funding rounds. Remember that each business is different and there is no exact timeline for the process!
Series Funding rounds
Funding rounds are a lengthy process with a lot to cover. Most commercial funding comes from outside investment. Which is typically when investors exchange capital for equity in the company.
Think of the whole funding process as planting a tree. The pre-seed part is the preparation of the terrain and needed materials. It is the most crucial part and could take years. Funding the start of your company, purchasing the necessary materials, and finding money. Usually, the investment comes from people around you – yourself, parents, friends, and other founders.
Your startup is starting to sprout and more capital is probably needed at this point. However, it will now come from potential investors who’d like a piece of your company in return – equity. The capital invested is intended to finance R&D. You should use it to research your market, product, and audience while also developing your product and even launching it.
Series A Funding
After sprouting comes growing which is what it is all about from here on! It is the most common to use this funding, which usually comes from investors in private equity firms. Series A funding is normally to expand the products offered, gain a bigger clientele and build a projection or forecast for future years.
Series B Funding
When your tree is already a little sturdy, you water it for fruits. In this funding phase, the capital goes towards growing. The purpose is to have the possibility to boost sales, develop marketing campaigns and implement strategies, have tech development, and nurture as much as possible the customer service.
Series C Funding
At this moment it is common to have big investors such as investment banks and private equity firms. Your tree is blooming and now you focus on keeping it alive and well. The capital would be going towards creating new products, acquiring another business, expanding into new markets, etc.
Series Startup funding and how it works a key knowledge when in need of capital for a project. Every business needs investment, understand it to get the most out of every round!
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