Early Stage Investing
Early-stage investing funds the first three stages of a company’s development.
Seed funding (seed capital): Money provided to help an entrepreneur start a business.
Startup funding: Money used to help a company develop products/services and start marketing these products/services.
Early-growth funding: Money to help establish and boost manufacturing and sales.
In all of these stages, you will be expected to give away equity in return, however, you can also do convertible loan structure – which will give you lower interest rates than going to bank to get a loan for a startup, but the equity element is higher, meaning you will be giving away more equity for less money. Note however though, that the equity does not go to the lender unless you are unable to repay the loan.
After your company matures, you can start to seek funding from late-stage investors.
Ah, that four letter word. An exit happens when an investor sells all or part of their ownership in the company. An exit also refers to you, the entrepreneur, ending your involvement with your company by selling your part in the business to an investor or to another company. Some entrepreneurs start a business already with an exit strategy in mind.
A fund is a pool of money set aside for a specific purpose. A fund can be established for any purpose, and is often professionally managed.
Late-stage investing supports companies that have moved past the startup development phase and are rapidly growing in sales, or have fast growth potential. Investors view this stage of investment to be less risky.
A seed round is where you will raise seed funding. This is amongst the first rounds of funding you will receive, and generally when your company is still young and gaining traction. Seed rounds larger than US$2 mil have become common in recent years. A seed round will usually come after angel rounds and before Series A.