Different Types of Startup Funding
Startup funding comes in various forms — each type of funding has a measurable limit and logic.
It is essential to conduct a cost and benefits analysis of startup investment types starting with Angel investment, venture capital investment to series funding, and IPOs.
What do all these investment types mean?
There are a lot of questions that buzzing in the founder’s mind when it comes to asking for money. Startup investment comes in various forms and via different mediums. Below, we listed the primary funding instruments through which you can finance your startup.
Series funding is proceeded in rounds in which the founder raises funds. There are pre-seed and seed rounds, Series A, B, C, D, and even E. In every round, the capital investment is higher than in previous.
This increment in rounds of funding is based on several factors that prove a better performance. There are a few KPIs that are taken into account in the series funding rounds: user base, revenue generated, performance, reviews, and others.
This guide helps you with finding out corresponding funding for your startup. And we aim to assist you in getting your project off the ground. Moreover, it’s essential to know what will wait for you right after the early rounds of funding.
You can check a tabular form of series funding limitations and benefits below:
|Series||Capital Limit||Reason||Sources||When Is the Right Time|
|Pre-seed||up to $500 000||It’s the first round of investments. Usually, these funds are used to validate the idea and build prototypes or MVP.||Founders themselves, their friends or family||From the very beginning. A pre-seed round may be the personal funds of the founder.|
|Seed||From $500 000 to $2 Million||It’s a stage of dynamic startup growth and the viability test of the core idea on a larger scale and with more complex business processes.||Angel investors, business incubators and accelerators, micro venture funds and venture capitalists||If after MVP launch your hypotheses were confirmed, then it’s time for rapid growth and pitching to investors to receive additional funds.|
|A||From $2 to $15 Million||Successful realization of seed funding. |
Now it’s time to move forward and enter the bigger markets.
|Angel Investors, |
Business incubators and accelerators,
|Startups that gained a footing and have been observing growth in numbers and metrics can go for this round. In other words, as soon as a seed funding starts to gain traction, it’s time to try for Series A Funding.|
|B||From $7 to $10 Million, with the company valuation must be between $30 to $60 Million||The founders have faith in the product and are ready to scale. |
They have the target market and know how and where to scale.
|Venture Capitalists firms |
Reinvestment from previous venture capitalists
|Two things are taken into account: |
An ideal mix of these things is a sign for the founders to go for Series B funding.
|C||More than $26 Million. |
The valuation of the company is about $100-$120 Million.
|The startup is mature enough to expand the product portfolio or reach out to new markets. |
There are talks about acquiring other firms as well as early-stage startups.
|Venture Capitalist Firms |
Equity Firms operating privately
|Three aspects should be taken into account before entering a Series C funding round. |
Few startups enter the Series D and E funding rounds. After a successful Series C funding, the founders usually think that it is the right time to open up for IPO.
|D||Capital Limit varies as very few startups make it to Series D funding.||Series D helps startups that are looking for one more round to boost their capital before they go for IPO. |
The second reason is that the startup experiences ‘Down Round”.
It means that the previous input of capital failed to bring the desired results.
|Venture Capitalist Firms||When a Series C funding has not been as successful as the company had thought, it can go for Series D funding round.|
|E||There is no prescribed limit since only a handful of companies go for Series E funding||There are three common reasons startups go for the last Series funding round: |
Not able to meet the Expectations
Requirement of funds
|Not certain. The sources of funding can vary accordingly to different circumstances and founders||Since Series E Funding is rarely practiced, there are no particular reasons for aiming at Series E funding round.|