Techeadline | Understanding The 5 Stages Of Funding A Startup
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Understanding The 5 Stages Of Funding A Startup


he growth of information technology and support for entrepreneurs has led to a sudden increase in the number of startups. There are thousands of new ones launched each year, all of them competing for funding. While some provide great services that were sorely needed, others improve upon existing services and streamline them. Either way, the stages of funding a startup remain the same. A startup cannot survive without the appropriate amount of investment coming in, and must do everything possible to get it. This is a tough for a startup and when someone starts a new business there are lots of challenges which are staring at them and they need to take care of those. Many people are confused with the right choices and also do not have a business plan in place and since all this is not in place there could be a problem and hence one needs to keep in mind. Everyone should have a business plan in place and once they have that it will make things much more easier.



1. Personal Savings Stage

This is the first stage, where the idea is developing. The founder works hard to turn one idea into a concrete structure. It needs to be scalable and feasible for each person that uses it. At this stage, the money pouring in to the project comes from the personal savings or from an existing job. For a lot of people, this is the make or break moment. If they can survive the first round as an unregistered company, they can move ahead to the next stage. Hence it is important that you have enough money in place to run the business and once you have that it will become much more easier. People need to go through the initial part which is tough and need some funds to at least get stated and hence the saving is a very important thing which one needs to consider. So what are you waiting for just prepare well and you will never be short of cash in you plan things in the right way, start thinking about starting a business sometime before execution start saving.


2. Co-Founder & Equity Stage

After the first stage is over, many founders look for a co-founder to help sort out the kinks. The skill set of the co-founder generally differs, so that two aspects of the business can be handled at once. There is close to no money to offer at this point, and equity in the company is the only way to get talent on board. Many co-founders will go for a 30-30 split, leaving the rest to attract skilled employees for further development. By this time, a prototype is ready to be built and tested. This is an important stage and people need to keep this in mind. You should not have an issue about the though process which is conflicting and it could lead to some serious problems.



3. Funding From Outside Stage

A constant flow of cash is required to begin operations on the prototype. This is one of the more frustrating stages of funding a start-up. Family and friends are the first option. They are promised equity or a free product once it is ready. This creates a pool of money that can last for a few months. At the same time, crowd funding can really help with bringing in more cash. It requires a fair amount of effort, but if successful, it can give yours start up a huge boost and make it visible to people that can take it to the next level.  There are many ways to do it if you have a super idea it should not be very difficult and hence you can really have a good time, so what are you waiting for, just go ahead and plan well and you will be on another level which will take you to sky and will let you share ideas and that should help grow your business long term.


4. Angel Investment Stage

This is possibly one of the stages of funding a startup that most entrepreneurs desperately hope for. If the working prototype or the crowd funding project is convincing enough, an angel investor could put money it in. This type of investment is generally done without the aim of an immediate return. For most part, the angel investor asks for a share in the company and a say in the decision making process.


5. Venture Capitalist Stage

Finally, this marks the end of the stages of funding a startup. A venture capitalist firm can elevate the company by putting in the right amount of money. At this point, a startup is considered as a successful venture and worthy of being supported.

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