Financing Strategies for Every Stage of Your Business

Bootstrapping, seed funding, equity crowdfunding, Series A. These are common strategies for businesses to get funded. The key is to identify when is the right moment and what type of funding is proper to seek.

Stage 1: Startup
In this phase and with the idea a reality a business may exist, but owner is responsible for finding customers, delivering a product or service and making enough money to survive. Most business owners are bootstrapping their way to the next stage of growth, which is building the company using nothing but personal savings and cash from first sales.  In venture capitalist terms, this is the “pre-seed” stage of financing. Typicall examples are crowdfunding campaigns. Until the business idea is something customers want, it’s generally not a good idea to take out a loan. Angel investors and venture capitalists want to see some early business results before participating in a funding round.

Stage 2: Survival
The business idea is something that customers want and will continue to buy into. The challenge is to grow  to become a business with revenues, expenses, assets and employees.  It is one of the hardest phases for new ventures.  During this phase, business will be in the seed phase of financing, when business gather working capital.  Here are some quick ways:

Angel investor offers financial backing to small startups in exchange for equity.
Equity crowdfunding is to raise capital for securities, such as equity and revenue shares.
Grants apply from federal and state agencies, as well as private companies.
Micro-lenders or small loans (less than $50,000, like are offered by individuals).
In this stage is too early for an SBA loan, which meeting criteria is difficult, like number of years in business, a credit card score and at least $100,000 in annual revenue.

Stage 3: Success
When business can sustain itself profitably, it may have reached the success stage. Ventures are welcomed unless the contrary of the stage occurs, like a natural disaster, economic downturn.  Entrepreneurs use financing in this phase to fuel growth, including new product line/service, new location or grow profits. Investors seek business’s track record.

Financing options in this phase are as follows:

In Venture capital, Series A consists between $2 million to $15 million in funding.
This is the stage for an SBA loan.
Short-term business loans for equipment purchase or to increase working capital.
Bridge loans for working capital while seeking long-term funding.

Stage 4: Take-off
Entrepreneurs choose to become a big business or selling the venture to start a new one. The best funding is to engage with a venture capitalist for Series B and Series C funding.

On Series B, there is a demand of product or service, more market research and development. Funding ranges $7 million and $10 million.
On Series C needs more capital for scaling and to acquire or merge with same venture.
Outside of these series, there are Series D and Series E financing rounds with same goals (continuous growth).

Stage 5: Maturity
A mature business will have a challenge to control finances. this is the stage where initial public offering (IPO) opportunities come. It requires close to $100 million in revenue and takes years of steady growth, continuous improvement of business idea as well as progressive funding.

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s