Startups need funding to turn their dreams into reality. But seeking and securing funding is a complex process that can impact a company’s trajectory in multiple ways. Knowing when and how much to raise can make all the difference.
The amount a startup needs to raise depends on the stage of its growth, key development milestones and current market conditions. Moreover, each round of financing comes with different expectations, risks, and types of investors.
Seed funding is typically the first round of institutional capital startups receive. This type of funding enables them to accomplish a variety of goals including building and testing their prototype, generating early revenue, and hiring the initial team.
After establishing traction and building their team, startups seek Series A funding. This phase often marks the beginning of a series of fundraising rounds with venture capital firms that are more interested in the potential for rapid growth and an exit opportunity. Series A funding usually involves giving up a larger share of ownership, which can further dilute founders’ stakes.
Startups at this stage also pursue incubator and accelerator programs, which provide workspace, mentorship, and other resources in exchange for equity or a convertible note. These programs are useful for gaining access to an experienced network of entrepreneurs and providing additional resources, such as sales and marketing guidance, to help grow their businesses.
Startups may also secure government grants or subsidies to reduce their financial burden. However, such resources are often highly competitive and have specific guidelines and requirements that must be met.
About the Author
