Start-ups typically go through various stages of funding. This is a simple explanation of the stages and potential range of funding.
- Pre-seed – for early stage business ideas that haven’t made sales and are at the rough idea stage. Pre-seed funding is used to do some initial work on product development and market size etc. to determine the product’s potential and attract additional investment rounds. Funding range: $10K to $50K plus. Sources: bootstrapping, family, friends, crowd funding.
- Seed funding – can be used for the minimum viable product (MVP), developing the business model, preliminary market research and test marketing. Funding range: $50K to $1million. Sources: accelerators, grants, angels, crowd funding.
- Series A funding – by this stage the business typically has revenue and a demonstrated market but may require venture capital funding for growth, operating costs, software development etc. Funding range: $2m – $5m plus for approx. 10% to 30% equity. Sources: angels, grants, venture capital, equity crowd funding.
- Series B funding – generally used to expand the team and scale the business. It may include salaries, infrastructure costs, office space, and the marketing and branding costs needed to enter a new region to achieve globalization. Funding range: $5m to $50m pls. Sources: investment funds, venture capital.
- Series C funding – can be used to accelerate growth, diversify, and/or enter international markets. Funding range: $100m to $500m. Sources: hedge funds, private equity firms, banks.
- Initial Public Offer (IPO) – this is usually the final stage although some companies also go through a Series D funding. The IPO is when a private company becomes public by selling its shares on the stock exchange. To list on the stock exchange the company works with an investment bank and is required to meet strict regulatory and other requirements. An IPO provides a large amount of capital for the company to achieve its growth objectives.
https://www.startups.com/library/expert-advice/different-stages-of-funding-for-startups
