A Complete Guide On Startup Funding And Its Stages

A Complete Guide On Startup Funding And Its Stages

What is a Startup?

Innovative ideas give you the wings to fly and reach heights. Who’d know this better than the entrepreneurs of India? They are striving ahead with the motive of making India Atma Nirbhar. Self reliance will open a door to a successful Indian economy and entrepreneurship is the only key to that door.

Today, MSME is one of the most promising sectors of the Indian economy. But what exactly does a startup mean and what does an entrepreneur actually do? A startup is pretty much a self-explanatory term. It means to start your own business or venture with your own unique and innovative idea. The individual with a knack of innovative ideas who wants to turn those ideas into a business venture and commercialise them is known as an entrepreneur. Moreover, entrepreneurship is full of challenges. Ideally, an entrepreneur is the one who fights back the challenges and efficiently solves the problems in the way.

A startup in its initial stages faces numerous challenges. The biggest challenge being the fund raising. The entrepreneurs usually lack the financial resources and are required to fetch it from the sources. A startup needs financial assistance from the very first step. Be it developing the prototype or building the proof of concept, everything requires finances which the entrepreneurs don’t have yet.

What Is Startup Funding?

Lack of capital and a potent business model is the fundamental nature of the startup. A startup, irrespective of its size or niche, requires funding assistance. Funding is the crucial part of turning innovative ideas into reality. A startup venture requires funding assistance to keep functioning at every stage. An idea needs proper execution to turn into a successful startup venture. Executing a plan asks for ample resources which the startup lacks. Then what does it do to meet its financial needs?

That’s when the startup funding comes into the scene. Startup funding is when the financial assistance is provided through external sources to the startups. The sources of such funding can be anywhere between a bank loan to a Venture Capitalist. There are various stages of the startup funding process that a startup goes through in order to avail the funds. Raising funds is not an easy task and “How to startup funding?” is one of the most difficult questions faced by entrepreneurs. There are various stages of startup funding:

  • Pre-Seed Funding/
  • Bootstrapping
  • Seed Funding
  • Series A/ Venture
  • Capital
  • Series B
  • Series C
  • Series D
  • IPO

Startup Funding Stages Explained

There are various types of startup funding as mentioned before. Going through various stages of funding is how the startups can avail different types of startup funding. If you are a budding entrepreneur who is yet to enter the market, hold on. Here we are going to explain the various startup funding stages in brief for you.

Pre-Seed Funding: Pre-Seed funding is the initial stage of funding when the startups require the capital to begin product development. Here, the equities are exchanged for product development. This stage of funding is aimed to help the budding entrepreneurs and mostly the investors here are the close friends and families of the entrepreneurs.

Seed Funding: Seed Funding is when the angel investors engage with the startup businesses during their early stages. This can be either during the formation stage or later on. The product development process must be completed during this stage.This round of funding is aimed to prove that the product is market-fit and ready to roll out.

Series A/ Venture Capital: Series A is also known as venture capital funding. This is one of the first rounds of the venture capital funding process. During this stage the startup is expected to have completed the product development process and should have proven that it is marketable. The startup should have a working business model and must be scalable in nature. The super angel investors or the venture capitalists are the ones who invest in startups during this stage. The stocks are exchanged with the investor during this round.

Series B: This round of funding aims at expansion and further development of the startup venture. Here, the startup is running full fledged and is looking for financial assistance to expand the business. This funding is ideally used to grow the business to the next level after utilising the series A funding for establishing a user base and having a proven track record of running successfully.

Series C: The startups which are already well established and running successfully go for Series C of funding. Here, the funding is aimed at developing new products, market expansion and to acquire other companies. In this round of funding, investments are attracted for an already successful startup. The main aim of the startup is to utilise this funding for scaling as quickly as possible and this might involve acquiring other companies in the process as well. The investors at this stage are in the form of hedge funds, investment banks, private equity firms, etc.

Series D: This stage of funding is where the venture capital firms come into the picture. This stage of funding is for the companies or startups that haven’t gone out in the public yet. At this stage the mergers are highly possible. This round is conducted if the startup was not able to acquire enough funding through Series C of funding.

IPO: This is the stage where the public participation comes in the form of shares purchased by them. IPO stands for Initial Public Offering. Here, a private corporation offers shares to the public in a new stock issuance for the first time. The corporation raises equity capital from public investors directly.

Want To Go For Funding?

Are you a budding entrepreneur who is thinking about beginning your startup venture and don’t know how to go about it? Get on a call with Egniol Services’ expert to receive the best consultancy and assistance for all types of businesses out there. We provide end-to-end services for startups. From assisting a startup to avail conventional funding or government startup funding to completing their branding process, we provide all. Egniol Services is your one stop solution for all your startup needs.
Book an appointment now to begin your fund acquisition process today with Egniol Services.

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