Regardless of nature and size, each startup requires funds to bring its innovative business ideas into life. The majority of startup businesses fail due to their failure to raise adequate required finances. You need some cash or funding to keep your business going at each stage. If you’re new to the world of business and have no clue about raising funds, you need to know about the different startup funding stages and the startup funding process.
Different stages of Startup Funding
1. Self-funding
A businessman should be in the stage to know how much sum they can contribute from their own pockets. Evaluate all the investments kept in your bank account, and approach your loved ones. Self-funding requires very little documentation, and your loved ones can give you a loan at a less expensive rate.
2. Seed-capital
Seed capital is an investment made at the starting stage of the startup. This helps the business in coming up with a perfect direction for your business. Assets raised at this stage are utilized for knowing the clients’ demands, preferences, and tastes. Many businesses raise this capital from companions, guides, and family, while some take up credits in return for basic stock.
3. Venture
When the final product arrives at the market, venture capital comes into play. Despite the profits, each business considers utilizing this stage that further includes numerous rounds of financing- Round 1, Round 2, and Round 3.
4. Initial public offering (IPO)
When a startup chooses to raise assets from people, including institutional financial bankers, it is known as an IPO (Initial Public Offering). Before raising an IPO, the organization should submit its financial reports and raise funds. For taking your startup to a higher level, you should realize which phase of funding you need to go for, for what reason. Such choices made at the correct time can be helpful for your business.
4 Simple Steps for Startup Funding Process
Are you looking for ways to get started with your startup funding? Follow these basic steps to launch your startup funding, boost your startup funding potential, and scale your business.
1. Outline your funding goals and objectives
The first step in startup funding is to measure the financing goals and objectives. Usually, funding goals are recorded in the business plan and then in the investor pitch deck. These tools are a roadmap for growing fast, staying focused, and achieving all the funding goals.
2. Prepare your budget
Building a precise spending budget is probably the hardest task, particularly for early startups with very little popularity. How do you know what to do with the investor’s money? To make a precise budget sheet and show investors that the cash will be utilized correctly, you need to consider the expenses like equipment costs, human resources, legal expenses, and traditional and digital marketing costs.
3. Research investors
Since you’ve laid out your fundraising objectives and made a startup budget sheet, now you need to find a startup investor. Start searching for an experienced startup financial investor by following these helpful tips-
Request Referrals: The ideal way to get on a financial investor’s radar is through an introduction. Each investor has their investment criteria. However, many investors will be interested in founders who come recommended to them. To get an extraordinary referral, start by interacting with industry leaders, coaches, peers, and individuals who have already have some experience in investing.
Make use of online communities: Check out some online research tools like Crunchbase, Gust, and SeedInvest. These online networks are the best for accessing investor information.
Talk With an Attorney: There are chances that your lawyer deals with term sheets and other investment legalities. Request that they introduce you to a startup investor client or two.
4. Prepare a perfect pitch
After you have found the right investor for your startup, you need to develop a pitch. Assemble all the essential financial documents— and show your investor why your business is a beneficial venture.
