Seed stage
This is money that is typically invested when the business is in the idea or concept stage. The founders are still investigating an idea and require money typically for market research and developing a prototype.
There are funds that focus only on seed stage companies. So, if you are looking for funds while in the seed stage, you need to weed out all the firms that do not focus on the seed stage and stay focus only on companies that focus on the seed stage.
Start up stage
The startup stage is usually the stage where the business has an idea and it needs capital to hire employees, get the product developed and launch the product.
Growth stage
This is a stage where your business is already generating revenues. You may or may not be profitable yet, but you have a tested product or service and you need more money to expand your business, to take it to new markets, increase your advertising budget or develop new products.
Mezzanine or bridge financing
This is the stage where your company is looking to go public. That is, you are looking to get listed on one of the stock exchanges. You may need money to hire an investment banker, do the paper work to get your company listed or promote your stock offering to potential buyers.
IPO
This is the stage where your company gets listed on the stock exchange for the first time. This is the time the founders of the company usually sell some of their shares in the company to cash out. It’s a time for the founders and investors to see some liquid cash.
Your business may not go through all these stages of funding. You may at the growth stage want to buy out your investors and use your business as a cash cow. All this depends on what your business goals are.
It is important to remember the various stages of funding because there are venture funds that specialize only in companies in particular stages of funding. For example, some venture funds will focus only on companies in the seed stage and some others will focus only on companies in the startup stage or the growth stage. So, you need to weed out the venture funds that are not applicable to your company.
Vinil Ramdev is an entrepreneur, business coach and author of the ebook “How to write a business plan for astonishing results? In just 3 days!” He is also founder of StartupGrowthExpert.com
Image: graur razvan ionut / FreeDigitalPhotos.net
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