Every startup needs funding to develop its business. Unfortunately, funding your startup can be difficult if you do it alone. This is why a lot of early-stage startups seek external funding from venture capital or angel investors. Here are 6 stages of startup funding.
Pre-seed is the early stage of startup funding. The pre-seed stage is also commonly known as bootstrapping. Bootstrapping is when a startup relies on its own funding without external investments. The funding can come from the founder’s capital, or from the founder’s relatives. At this stage, the founders are still experimenting and testing their idea in the market. Usually, the amount of funding in this stage is around $10,000 to $250,000.
After experimenting with their idea, it’s time for a startup to get its feet on the market. Seed funding is an initial investment given to startups to help them launch their products or services in the market. Startups use seed funding to set up their business by hiring essential staff, renting an office, buying necessary equipment, and many more. Seed Funding can come from the founders and their relatives, angel investors, crowdfunding, or even micro venture capital. Seed funding is usually around $50,000 to $3 million.
After years of developing their products or services in the market, startups can either fail or grow. When a startup experiences significant growth in their seed funding stage, they usually aim for a series A funding round. Startups use this funding to develop their existing businesses and have a stronger grip on their market base. Series A funding typically comes from angel investors, accelerators, and venture capitals. In this round, startups can gain around $10 million of funds.
In Series B funding, startups are usually in their expansion stage. In this stage, startups aim to expand their current market base, diversify their products and services, expand their team, and beat their competitors. In this stage, startups can raise around $26 million of funding.
Series C round starts when startups that have gained series B funding have proven to be successful in scaling up their business. In this stage, the startup aims to accelerate its business even more. Some of the ways to scale up their startups are by acquiring new companies, expanding to another country, and creating even more variety of products and services. In this stage, a startup can gain around $50 million of funding.
IPO (Initial Public Offering) is the culmination of startup funding stages. The IPO stage starts when startups gain unicorn status (have $1 million of valuation). This is where startups decide to sell some portions of their share to the public. However, not all startups can reach the IPO stage. There are a lot of requirements to get into the IPO stage. One of the startups that reached the IPO stage in Indonesia is Bukalapak.
Before pitching to investors, check out their portfolio and research whether your business model is similar to what they are looking for. Your investor should fit with the current condition of your startup. If it’s an early startup, you can seek investments from family or relatives or you can also aim for angel investors and micro venture capitals.
Make sure your pitch has good storytelling of the problem and your unique solution. You should introduce your startup comprehensively from the target market, competitor, team condition, financial projections, marketing strategy, and success metrics. To understand more about startup pitch deck, check our article about how to make a winning pitch deck.
Most startup incubators/accelerators have a lot of partners and can help you connect with investors. By joining the startup incubator/accelerator, you can gain funding from angel investors or even venture capital.
Gear Up is a startup brainstorming partner in Indonesia that provides one-on-one and catered support for the chosen startups in our network. How are we different from ordinary startup incubators?
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