Rounds of financing that provided by Venture capital firms, are very important and considered as the primary fuel of any startup:
To be specific and main to the point, and not to be dispersed… in this simple article, we will talk about the “rounds of financing” by venture capital firms in the form of venture capital funds, and how is the process is so important for any startup.
Talking about rounds of finance provided by venture capital firms may not differ from the stages of financing [as discussed earlier in venture capital funds and financing stages].
we can start rounds of Financing with Seed Funding round:
So What is A Seed Funding?
- This is an initial step in the Rounds of financing.
- the main goal behind this round to take the idea to the initial step, and help to make
- product development
- further research.
- or hire a new member in your management team and helps you is salaries.
- usually in a seed funding round, the source of the fund came from family, friends, or someone who has a lot of money (wealthy), and want to invest in this startup, who called angel investors.
- The amount of fund in seed funding is between $500,000 and $2 million also it reaches to $6milion, and maybe more or less depending on the idea – company – and the Venture Capital firms limit
- the most and important objective for the startup is to manage this round of found by assign qualified management members, doing an initial development for the idea (product or service) and make a very good Further research and anything else that will enable a company to attract investors for the next round of financing.
- This is the riskiest stage (you are investing on paper [ the idea of the startup]
2-Series A funding:
- of course, in this round, the amount of fund is going to be more than in the previous stage (from $2-3 million to be $10:20 million).
- according to macabacus, Series A is the company’s first institutional financing, and the valuation is based on the performance of the management team (who assigned at the previous stage) and the performance and the results of the seed round.
- Series A funding round is a continuous process for:
- Developing the product,
- hire new professional management team members,
- and also make further research
- But in things will be added like:
- prepare your product to be able to be in the market.
- initiate business development, business model.
- At the end of this stage, the product is in the market.
3-Series B Funding:
- This stage for the successful startups, Which succeeded in launching its products in the market (tangible products);
However, it succeeded in seizing its small market share.
- So in this round, venture capital firms help the startup, to be more involved in the market, and trying to achieve and get more market share in the whole market, and also help startups to face competitors. ( In this stage the funds are to help the startup to scale up [geographic expansion into new markets, and generally scaling.] ).
- And according to macabacus, the main objective in this stage includes:
- revenue transactions.
- building scale.
- operational development.
- further product development.
- And value creation for the next round of financing [nearly this is a fixed step in all stages, that you create a value that attracts investors to invest more and more.
4-series C Funding:
- at this stage, the huge fund designed for, helping to finance the company to take over another company, increase the operating capital to achieve profitability, or help the company to develop and new good or service, or finance and prepare the company issue shares and securities via IPO.
photo from freepik
it’s so important to get funded to help you to build up your startup or your venture.
According to small business trend, The second most likely cause of failure any small business or startup, is they are out of cash [by 29 %].
and the first and important reason is there is no need for the idea by [49%]….. (the need of your idea is the most important factor to pass the first and second step in Rounds of financing by the way ).
We at SME Consulting can provide you with business consulting services like business planning, financial planning, marketing research, business modeling that is mandatory at all the venture capital firms to fund your business.