Last year 2015, Angels & Venture Capitalists invested more than $72 billion in companies. That’s nearly 3x the amount of 7 years ago. Time for you to “Go for it !!!
Topics: the Need, Pre-Seed Capital Stage, Seed-Capital Stage, Micro VCs, Crowd-Funding, Super Angels, Growth Stage. Series A, B & C Funding, Mezzanine Stage.
The need for Finding Funding. There is one inevitable truth about starting and growing a business. You need to engage in Finding Funding. That’s why entrepreneurs spend much of their time looking for investors, and why VCs have assumed an increasingly influential role in business. According to the a top 5 Accounting firm Ernst & Young, the amount of money venture capitalists invested in companies rose from $24B in 2009 to $72B in 2015 = 3x. Separate surveys found Angel investments in the U.S. rose from $17B to $24B over roughly the same period – 40%. Angel funding usually serve as the initial funding for many start-ups. With the occasional setback, those totals are likely to continue rising as VC & others, look for the next Apple or Facebook. Summary of different Stages of Funding a business is below.
1. Pre-Seed Capital Stage. Typically, pre-seed capital may be provided by family & friends who know and want to support the entrepreneur or fools that like to take risks for the possible reward. Since very little is known about the product at this high-risk stage, pre-seed investors tend to fund “smart”, “unique” ideas. These are not the only resources available to entrepreneurs at this initial stage.
Other Resources. So-called Seed Accelerators offer services such as Mentorship, office spaces & programs that help entrepreneurs refine pitches to investors. Top U.S. accelerators in 2015 include Y Combinator, Angel Pad, Mucker Lab & Tech Stars.
Worth it. A full 95% of entrepreneurs surveyed in 2014 said that the Pre-seed programs they attended were worth the Equity stake they gave up. However, some observers of entrepreneurship argue that looking for excessive funding at this stage may kill credibility with bigger investors in the near future, making funding difficult at later stages.
2. Seed-Capital Stage, is needed to expand their businesses from the Launch stage. They are turning increasingly to a growing number of so-called Micro-Venture Capital firms for this level of funding — generally smaller amounts than appear at later Venture Capital stages. According to a 2015 article, there are more than 200 . . .
Micro-VC firms. Expect the number to double over the next few years. [Examples: AngelList & FundersClub] Crowd Funding under Title III of the Jumpstart our Business Startups (Jobs) Act, allow start-ups to acquire funding in an inexpensive way through online portals from un-accredited investors. Among other things, an entrepreneur must explain the unique features of the product, target a market audience & how much capital is needed. Rewards-based Crowd-Funding outfits such as KickStarter & Indie GoGo, offer benefits to contributors in proportion to their donations. Such offerings could be current or future goods & services. Other Crowd-Funding. Charity/Non-Profit Crowd-Funding platforms are available – GoFundMe & YouCaring.
Equity Crowd-Funding from OneVest or CrowdFunder allows funding companies to hold portions in a start-up. That makes them shareholders of any future profits in the company.
Super Angels fund a pool of startups by investing their own money multiple times. In installments, these angels provide funds at earlier phases than traditional VCs. Sometimes Angels jointly invest in start-ups selected by an experienced investor. Such syndicate investing funds include Syndicate Room & Cambridge Capital Group. Other avenues for seed-capital include corporate seed funds that are part of mature companies such as Alphabet’s Google and Intel Capital. This sort of funding mostly leads to an acquisition later – where the start-up becomes an extended arm of the established firm.
3. Growth Stage.
Series A Funding requires a complete Business Plan that focuses on the introduction & scaling of a product across different markets, progress reports & the creation of a larger user base. This round of capital is mostly received through VCs who are allotted “preferred” shares to retain long-term control over the company. For a Series A round of financing, the product needs to show how much it has grown through Seed Capital financing.
Series B Funding is required when the company needs to scale up its product – after it has an established a Customer Base & an comprehensive Business Plan
4. Mezzanine Stage. Series C & later stages occur once a company has proven that it has a “robust” business model. Examples of companies at this stage include Airbnb, Grab, Unity, Hike, etc. Investors at this stage finance the steps of going public and bridge the gap between expansion & going public. Leading investors in this round consist of investment banks, private equity firms, & large venture capital firms. Examples: Many tech firms like Facebook, Twitter & Yelp used VC funding on their way to going public. Even companies that succeed in raising money fail. According to CB Insights, which tracks VC activity, many start-ups fail within 20 months after raising capital. Many of them fail to find an audience. Others struggle with management issues or a fundamentally flawed Business Model. Yet there is also no shortage of companies in recent years that have successfully navigated the various funding stages capably and have thrived as publicly traded companies – after their IPO.
Comments: Do you know of any other way for Finding Funding.
from The Street.com 02 Nov 16 enhanced by Peter/CXO Wiz4biz
Click here for more info on Link for Finding Funding.