Showing posts with label Online Business. Show all posts
Showing posts with label Online Business. Show all posts

Thursday

How Does Startup Funding Work [Infographic]

Posted By: Arin Dey - November 14, 2019
Funding a startup can be a frustrating, time-consuming process. If this is your first time funding a business, don’t worry. We’ll break down every step of the process and how it impacts your ownership. The first thing to understand about funding is that is not done all at once. There are multiple rounds of funding that occur as the business grows.

How Does Startup Funding Work [Infographic]

In the beginning stages, funding will typically come from your savings, loans, and family members. You should create a pitch deck, demonstrate an understanding of the market, and use this as an opportunity to show you have the skills necessary to run a business.

After you’ve honed your pitch, you should consider bringing on a co-founder. This can be someone to bounce your ideas off, or even someone that compliments your skillset. Keep in mind that startups with two co-founders raise 30% more than startups with only one.

The next stage is known as pre-seed funding. This is when you present your fine-tuned pitch to family and friends, and potential angel investors. Keep your expectations in check, funding for this round typically doesn’t exceed a million dollars. However, this money will be critical to the success of your company, allowing you to hire your first employees or even secure an office to work out of.

Up next is the seed round. $1.7 million is the typical amount raised during this phase. This is the stage where venture capitalist funds and accelerators start to show interest in your company. However, depending on the source of funding, you may give up 10-25% of equity during this stage.

Investments in the Series A - C rounds will be range from $10 to $25 million, but will in turn require you to give up more equity of your company.

The final stage is known as an initial public offering (IPO). Up until this round of funding, he shares of the company are privately held, and can’t be offered to the public. Through an IPO, the previously private shares can now be sold to the public. This allows investors to liquidate their shares if they choose, and allows the company to raise even more money. Once a company goes public, the value of the company switches from an investor’s valuation to the trust and judgement of the public at large. Everything is summarized about startup funding in the infographic below.

How Does Startup Funding Work [Infographic]

Source: Fundera

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