In the following lines, we will explain the different financing rounds that exist, as well as the types of investors.
What is a funding round?
Through financing rounds, the possibility is opened for new partners to acquire a part of the Startup's share capital through the disbursement of capital that gives them liquidity and allows them to continue developing their action plan. These financings come from investors such as business angels or venture capital firms.
This type of financing can be used as a basis for diversifying into other markets, consolidating in other countries, developing technology or investing in marketing. Each round can mean a boost that can be decisive in positioning yourself above the competition.
Types of financing rounds
There are many rounds of funding that startups can apply for, usually defined by a letter. The most common rounds are:
Seed or round of angels
The seed round typically occurs when the company is in the early idea stage, or once the founder has a prototype or proof of concept, as well as some sort of signal that there is demand for what could be offered.
An angel round often happens when a company is just launching, if not before. Chances are you will need investment to support the business because it probably won't generate a large enough cash flow to cover all of the day-to-day running costs.
Angel investors are people or entities with business experience who are interested in promoting entrepreneurship.
Typically, investors will put up smaller amounts in exchange for shares, because the company will have little or no track record and the risk is greater than for a more established company.
In Latin America, during the seed stage, investments are geared toward assuming the risks of technology and adoption of the product in the market, and investment amounts typically range between $100,000 and $1 million, according to Forbes.
Series A Round
As with the previous round, investing at this stage is generally considered high risk because the company will likely still be in the early stage with a lot to prove.
Like angels, venture capitalists can also invest. Angels usually invest their own money and are often considered high net worth individuals. Venture capitalists and other institutional investors tend to invest other people's money, so they usually only invest in companies with a proven track record to reduce their risk.
Previous investors can participate. Although at this stage, startups will start to require the involvement of investors who can really help take the company to the next level.
At this stage, startups have formulated a specific plan for their product or service. The capital raised is primarily used for marketing and to improve brand credibility, tap into new markets, and help the business grow.
How to acquire Series A financing?
A company's valuation will be affected by a number of factors, including the company's management, size, track record, risk, and growth potential. Analysts may be called in for a professional valuation of the business.
During a Series A round, investors will typically be able to buy between 10% and 30% of the business. The company itself will be able to decide how much it wants to sell during its Series A round and may want to retain as much control of the company as possible.
Round Series B
This is the second round of funding from private equity investors philippine whatsapp number and venture capitalists. At this stage, the company will likely have a higher valuation than before. The risk will be lower, as the company will have a track record, so the cost of investment may be higher.
Investors expect to see signs of growth at this stage in:
Income
Users
Product and service success
How to get Series B funding?
Series B funding will come from the same investors who initially provided Series A funding. Other times, Series B funding may come from additional investors or from firms that specialize in investing. Either way, investors will typically pay more for less equity than investors in previous funding rounds, because the company's valuation will have scaled.
A Series B funding valuation will need to consider the company's current performance and its potential. Analysts can be used to price a company seeking Series B funding. However, it is also worth noting that the company itself has more negotiating power as a Series B company, as it has proven to be successful.
Ronda Series C
A Series C round is typically required when a company is ready for significant growth. At this stage the company typically:
They have become a proven success in their market.
Wants to make acquisitions of competitors
Wants to increase market share
You need to expand or develop new products or services
How to acquire Series C financing?
In these last rounds of investment, venture capital funds and even financial investment entities usually participate, with the profile of the investor being more specialized, with greater financial muscle and also with sufficient knowledge to calculate the growth and return on their investment.
As the company approaches a Series C valuation, it will likely speak for itself and will have more incoming requests from investors. These investors are likely to be later-stage venture capital funds, private equity firms, and banks.
At this point, the startup is no longer really a “startup,” but rather an established company with a proven business model, that needs to expand its product offering, expand into new markets, or expand its marketing output.
IPO (initial public offering)
When a startup decides to raise funds from the public, including institutional and individual investors, by selling its shares, it is known as an IPO (initial public offering). IPO is commonly associated with “going public” as the general public now wants to invest in your company by buying shares.
IPO basically helps the company to grow and diversify into the areas of its choice. To take your startup to the next level, you need to know which stage of funding you want to go for and for what purpose. These decisions taken at the right time can go a long way for your business.
Conclusion