Seed Capital is the earliest source of investment for the startup. Sources will include channel slide upon since childhood, such as the Bank of Family & Friends, Credit Cards, personal savings, or crowdfunding. No matter whom you raise money from, there is no free money, and interest in their startup should be clearly defined. Strive to offer tangible deliverables and milestones and update them regularly on your progress. The purpose of the money that you are raising at this stage is commonly focused on R&D for an initial product or an MVP if you do not have one.
As your startup needs to grow and you need to scale or increase funding towards product development, marketing, or just to expand your team to keep you up the momentum, you may look for the angel investors as a solution. If your startup is raising money at this stage, then your business model canvas should be proven. Angel investors, as defined by the SEBI, are individuals who have a net worth of at least one million dollars and an annual income of at least two lacs or three lacs jointly with a spouse. Angel investors differ from other investment entities such as Venture Capital firms since they are using their own money and should be treated as such when solicited for funding.
Venture Capital Financing
Venture Capital Funding can offer resources to scale the business to new business channels, customer segments, or to increase marketing efforts for additional customer acquisition. At this point of stage, your startup is either profitable or could benefit from offsetting the negative cash flow with this new wave of investment while the business continues to grow. Multiple rounds of funding at this point of stage may happen, and investors may also offer to join the organization and provide additional expertise.
Pursuing an equity fundraise means that, in exchange for money they invest now, investors will receive a stake in your company and its performance moving forward. Equity is one of the most sought after forms of capital for entrepreneurs, in part because it is an attractive option – no repayment schedule! High powered investor partners!
Debt or which is also known as loan is probably the second most instinctive option most entrepreneurs have. It means you borrow money, usually from a bank, to finance your business and repay the money with interest within a stipulated time period. Debt is yet another attractive option for entrepreneurs because it would be given them complete control over the business. Loans can help you finance short term needs like working capital, payroll, and some other miscellaneous expenses.
IPO (Initial Public Offering)
This is not the end goal for all startups. Moreover, if you have secured money through each of the preceding stages, going public is an option to expand further. All of the investors who have started their money for equity until this post will ideally recoup their investments along with some of the additional profit. Some investors may even retain their shares, but don’t be surprised if many of them sell their stock at the beginning to reap the rewards of getting in early. After the launching of IPO, stock options for a growing company can be used to attract top talent, and increased access to capital can provide resources to push the momentum of your business forward. Looking to secure funds for your startup? Join Growcent today, we help startups fundraise from more than 1000+ investors.