There are two common ways that businesses raise money. It could either be through equity or debt financing.
However, the mode of raising money is not as important as the reason why you’re raising the money.
And to understand the reasons, I have compiled a list of the 6 stages that you may need a funding round in your business.
The 6 Stages You May Decide To Raise Capital 💰
1. Idea stage
Only few businesses raise funds during the idea stage. This is because much focus is made towards validating the idea, instead of raising capital.
If you would ask me, I had say you use your personal cash during the process of carrying out your Market Research.
2. Pre Seed
This is the stage where you kickstart your business based on the research you’ve done.
Here you can register your company and start building a strong team.
As a matter of fact, I believe you shouldn’t raise money if your business idea is not viable enough.
3. Seed Funding
This the first official money for a startup. This money is use to develop a minimum viable product that you can sell in the market.
You can use a grant as your seed capital, borrow loan from a bank or even collect capital from a single investor.
Note: do not borrow money to develop a product that’s not viable in the market.
4. Series A
This is the first round of capital you raise for your business.
A funding round is an investment from a two or more investors.
At this stage, your product is already developed and you’re ready to start building your customer base.
If you would ask me, I had suggest you raise capital only if enough customers are showing interest in your product.
A good sign will be if you have a tangible number of customers who had pre-orders your product 😉.
5. Series B
This is usually your second round of fund raising.
At this stage, you’re ready to expand your market reach i.e. you want to increase your customer base from 100 to 1,000 or from 1,000 to 10,000.
I advise you raise money if:
- More customers are showing interest in your product, and ;
- You can deliver it to them without sacrificing the quality, cost and time required to deliver the product.
6. Series C
This a funding round for largely established companies that have been running for a long period of time.
Most times, this companies are mergers and acquisitions that need capital to expand operations and profitability.
I believe you’ve learnt something. Hopefully, I will like to know the stage you would prefer to raise funds.
Do share them with me in the comments box below👇.