If you’re an entrepreneur and you want to scale your business, you’re going to need capital. It’s not just about funding, it’s about finding the right investors for the stage your business is in. Approaching the right investor at the wrong stage of your business is a waste of time and energy.
Yes, with the creation and development of alternative financing vehicles, capital is now easier to raise than ever. The available options are numerous and range from the typical family/friends to new investment groups to crowdfunding. The proliferation of angel investment groups alone is astounding. But which one is right for the stage your business is in now?
These are the three main elements to consider:
- Maturity level of your business
- Purpose of raising capital
- How the funds will be allocated
What stage is your business in?
I have a great idea
If your business is still in the idea stage, you’ll be looking for seed capital. And as it implies, seed capital is provided at the concept stage. It’s an idea that an investor feels warrants more thorough research and investigation. However, the investment is generally not a very large sum of money, usually up to $250,000. This is merely to research, expand on a possibility and prove or disprove a concept. Can this idea become a viable business? Does this warrant a major capital investment? Most of all, seed funding allows an investor to decide whether it would be worth making a larger investment in the form of startup capital.
Seed capital is the right investor for your business if you need:
A working prototype or process
A working team
Generate investor interest for successive financing rounds
Testing the waters before committing to a full-scale investment
Where to find seed capital:
Small business loans
FFF – Friends, Family and Fools
My idea is a viable business and I’m ready to start a company
You’re past the concept stage and you’re ready to actually implement an idea. You have a good business plan, financial model, and an executive presentation. You need startup capital. It’s used to get a business with a proven idea up and running. And it’s usually a larger amount of money that would be provided for seed capital, in the range of $250,000-$1 million.
Startup capital is the right investor for your business if you need:
Legal registration of your company
Permits, licenses, etc.
An office or place of business
Furniture and equipment for your new office or business
Development and manufacturing of your product
Selling your product or service to gain some traction
Any other expense specific to your industry
Where to find startup capital:
My business is up and running
If you’re up and running, you’re in the funding or rollout stage, also known as A-round financing. You’re selling a commercial offering and you’ve established a foothold. You have price and cost validated, significant customer sales and a proven revenue stream. This is where financing starts to climb, with funding in the $1-10 million range.
A-round financing is the right investor for your business if you need:
Expand product or service across different markets
Evolve business model to one that will generate long-term profit
Build management team for long-term growth
Where to find A-round financing:
Early stage venture capital investors
My business is successful and I’m looking to grow and scale
You’ve garnered a large market and that’s resulted in significant traction. You have more than 30 employees and more than $1 million in revenue. You’re no longer focused on growing, you’re focused on thriving. The next step is scaling your infrastructure and that means B-round and above, financing. The financing you need generally starts at $5 million to more than $50 million, depending on the round.
B to G-round financing is the right investor for your business if you need:
Growth and scaling
Where to find B to G-round financing:
Venture capital firms
Private equity firms
I want to take my company public
This is the pre-IPO stage or exit stage. Your investors want to see a return and gain from their investment. The most common options at this point are a merger or acquisition (M&A), going private, or going public with an Initial Public Offering (IPO).
Finding the right funding for the right stage will have a significant impact on your company’s success. And it’s not just about money. The right type of investor will also increase your company’s credibility and industry networks and that will propel your movement through the next stages.
To Your Growth & Profits
William De Temple, CEO Antirion LLC
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