What Are the Phases of Startup Funding?
The sources of startup funding that are right for your business often depend on what phase you’re in. Before we dive into your options, let’s review the phases of a startup.
Pre-Seed and Seed Funding: Planting the First Financial Seeds
The pre-seed phase begins as soon as you think of your product idea. Once you’re serious about starting a business, you might ask friends, family, and other supporters for funds, plus contribute some of your own savings or borrow against a credit card. That’s pre-seed funding.
Seed funding is typically the first “official” early-stage startup funding, where you’ll get investors involved. It helps you make a business plan, do research, and develop and launch your product.
Series A, B, C: Fueling Growth and Expansion
As your startup grows, you’ll go through more rounds known as series funding. It’s typically broken up into series A, B, and C, but there can be more rounds. When they happen depends on things like your growth speed, your growth potential, and your market size.
For each round, you’ll offer potential shares in your company to lenders like venture capitalists in exchange for funding, known as equity funding. You’ll also need to build and present a business plan for long-term profit.
IPO: Going Public and Beyond
An initial public offering (IPO) occurs when a private company offers its shares to the public for the first time, becoming publicly traded. It’s an important milestone that means you can raise more capital, attract more investment, and boost your audience. Once your startup makes an IPO, you’re officially not a startup anymore!
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