The 5 Key Stages of Raising Venture Capital ? What You Need to Know
Article by Bram Larrick
Venture capital is always raised in different stages or rounds. The majority of companies that are attempting to raise venture capital will normally receive a number of financing rounds.
It is important for companies seeking financing to consider the following five stages when they enter into negotiating deal terms:
1. Pre-Seed FundingNot every company will raise the pre-seed round, but it is quite common. Pre-seed funding is essentially the initial capital that a company will raise from friends and family. Pre-seed funding can vary a lot in the amount, with a typical value ranging from as low as ?5,000 to as high as ?100,000. The aim of this funding is for a company to build its management team and perfect its business plan, putting it in a stronger position for the next round of funding.
2. Seed FundingA typical amount of funding for the seed funding round will normally range from ?100,000 to ?500,000. This funding is raised by SFLG loans and angel investors, although the early stage venture capital firm may also be involved. It refers to the capital brought in by a company before the initial institutional funding round, which involves capital invested by a venture capital firm or other institution. The common structure for seed investments are as common stock or convertible notes.
3. Early Stage InvestmentEarly stage investment refers to the Series A and Series B rounds. It is usually venture capital firms who provide these funds, and they normally come into play when the company has completed the initial products, has shown initial revenue and can show fast and steady growth.
The Series A round is normally between ?1 million and ?3 million, and refers to the first round of institutional funding. Its name comes from the preferred stock that investors receive for their capital, and the aim of the round is to fund the early stage business operations, which will provide enough capital for between six months and two years of operations. The funds that are received from this round are used for everything from marketing and product development to salaries.
Series B follows on immediately from Series A, and normally raises between ?3 million and ?10 million. However, on some occasions this can be higher, with anything up to ?20 million generated in capital. When moving from Series A to Series B, the aim for the business owner is to show market adoption. If this fails and the company is unable to show resonation with the target demographic or market, the chances of moving on to future funding become a lot lower.
4. Later Stage InvestmentThe later stage investment refers to Series C, D and onwards, which can go up to over 10 rounds of financing depending on the company. These rounds all refer to further venture capital rounds, and each round can raise from ?5 million to over ?20 million. Only companies that can demonstrate a high success level, and have either reached or are getting close to a break-even point, and are now attempting to expand, are eligible for this type of financing.
5. Mezzanine FinancingThis type of capital is provided as debt, equity or a convertible note, and a company will receive this before its IPO. This is a less risky form of investment because the company is at a point where it is normally very solid and investors will be able to see return on their investment relatively quickly. Of course, risk still exists because a company may cancel their IPO or the valuation could turn out to be lower than expected, or the IPO company could lose value following the event. Any investors in pre-IPO companies are normally obliged to follow a period known as the ?lock-up period?, which refers to a period, normally a year, after the IPO where they cannot sell their shares of the company.
So go, follow these points and prepare your own business plans and make a powerful power point presentation and put your plan in front of the business angels or venture capitalists and it would definitely help you raising capital for your business.
About the Author
Are you looking for business funding? Venturesgained.com is the easiest way to get in touch with venture capital firms, business angels, private investors and all venture capitalists from London and whole UK.
Related posts:
Source: http://virtualblackswanmarketing.com/?p=9600
gavin degraw gavin degraw primary results cab calloway dale earnhardt jr bethenny frankel the bachelor
No comments:
Post a Comment