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Startups are the foundation of the growing industry all over the world because everyone wants something their own that’s the reason, more than 100 million startups launched every year according to GEM national report.

Microsoft, Amazon, Google, and Alibaba. These successful startups are the reason why most students in universities and employes sitting in their cubicles are having their different startup’s ideas. But one question that troubles the most is “how to get the funds?”

Having a brilliant idea is not enough for a startup. It requires proper planning, lot of time, discipline, dedication and most importantly funding. Almost, every startup somehow requires at least two rounds of external funding stages for growing firmly.

If you are an entrepreneur or planning for your startup. This article will help you to know about the stages of startups funding.

Stages of funding a startup

Funding helps the startup to grow and expand in the market. These fundings start with a seed and reach IPO at the last. Entrepreneurs need to know which one is perfect for them or where they have to stop.

Pre-seed funding

Pre-seeding is also known as bootstrap which is a part of the self-starting process when an entrepreneur launched its startup with very little and without outside cash and other support. This is a very first investment of founders which help them to set up their business. It can be the founder’s personal saving or PF & FF of the previous job.

Many people don’t consider this stage as a part of the funding cycle so you can say its a part of the startup cycle. This is the initial stage of a company where founders work with a very small team or even by themselves.

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Funding: As it is part of the Startup cycle, it depends on the founders how much money they can raise.

Investors: Founders themselves.

Seed funding or angel round

The seed is what grows. The seed fund is the first fund which is raised by startup. Seed fund grows the company and makes them take the first steps of product development and market research.

This is usually a small amount of money which can be funded by the founder’s family and friends or they can approach any investors and convince them to invest in your startup to get enough funds that is why we called seed funding as an angle round as well.

But after investing an amount, this angel investor becomes a limited stakeholder in your firm. This stake can be 10% and more.

Funding amount: $50,000 to $2m

Comapany value: Minimum $3m.

Investors: Family and friends, angels and early-stage VCs.

A stage funding

When it’s about revenue growth, startups head towards stage A funding. This A funding stands for venture capital financing. VC’s funding amount is bigger than seed funding. The company makes sure at this time their product is the best fit for the market. They conquered targeted users, views, revenue, and what is other is KPIs (key performance indicator).

This funding requires the company to have a plan to generate more revenue and come up with more ideas to develop their products customer base. They also expected to use the money to increase revenue. This is a stage where the journey starts for an entrepreneur to get fundraise and keep connected with investors

Average funding amount: $10 million to $30 million

Minimum valuation of the company: $15 million

Investors: Super angels, VCs, and accelerators

B stage funding

If any startup wants to go further for B round of funding, they need to make sure that they have already developed their user base and revenue in previous funding(A stage). Means they have proven themselves that they have achieved all the previous goals and now able to achieve success on a larger scale.

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Stage B investment might allow them to expensive hiring (development, marketing, and product manager) and improving a workspace for employee pleasing. Expanding into new markets, segments and experiment with revenue even buy out business can be mainstream of this funding.

Average funding amount: Approx. $30 million

minimum valuation of the company: $30 million to $60 million

Investors: GV, startX, VCs and late-stage VCs,

C stage funding

When a company doing very well with funding B and now ready to expand into a new market (especially international), develop a new product or acquire new business. that is the perfect time to raise by funding c.

Average funding amount: $50 million

minimum valuation of a company: $100 million

Investors: Banks, hedge funds,late-stage VCs and private equity firm.

At this stage, investors happily fund startups because they are hopefull to received profit in the back.

This is all about fast growth and these stages go on to D and E until they take you company IPO.

IPO

investors in people

Some giant organizations offer the general public to buy their shares for the first time that is called initial public offering(IPO). At this stage, companies have become enough potential to raise money by selling their share.

Typically investment bankers decide who will sell the share and what will be the price and all. Once a stock is out, it can be traded with the stock exchange. The company can offer its stock with some addition as well.

Every country has its own criteria for IPO. Being a united states organization, there are some basic terms and conditions need to follow during the IPO process.

  1. For being an IPO organization, they need to comprise their organization with lawyers, underwriters, SEC expert and certified public accounts.
  2. A company should be enough established and having its current audit financial statement and expected future goals for convincing the public to purchase stocks.
  3. The organization should be filed its prospectus with the SEC and decided the date when they are going on the public.
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Some advantages of IPO

IPO is not a platform for raising a fund for entrepreneurs. There are some other advantages as well, especially for the public.

  1. An IPO organization is able to generate additional funds by offering their shares and the public can also earn huge money overnight by selling and buying their shares.
  2. Mainly, employes like to invest these share markets because it is an open-source investment where purchasing and selling are very easy.
  3. Being a public organization requires more talent to hire as well.
  4. Some mergers use public money to invest in other startups as this is a good source of funding.

These stages give a chance to the entrepreneurs for scaling their startups. it helps them to identify their stand in the market and what their net worth. A startup should be mature enough to qualify specific round so it can go for further rounds.

many startups fail when they come in public and some of them become angel investors and start investing in other startups. After all, they become a guide or speaker who advises other entrepreneurs on how to grow their startup and make it profitable.

Some entrepreneurs sell their startups to other organization. Instagram is a great example of its growth. It was started with $50,000 seed funding and later, they got A and B series funding of $7 million and $50 million respectively. Eventually, they were purchased by Facebook for nearly $1Billion.

Source: InApps.net

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As a Senior Tech Enthusiast, I bring a decade of experience to the realm of tech writing, blending deep industry knowledge with a passion for storytelling. With expertise in software development to emerging tech trends like AI and IoT—my articles not only inform but also inspire. My journey in tech writing has been marked by a commitment to accuracy, clarity, and engaging storytelling, making me a trusted voice in the tech community.

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