A Complete Guide to Different Types of Startup Funding Stages 

Building a startup is no easy feat. You have to do everything from product development to building a team and invest in marketing. All this requires extensive capital, but doing everything with self-funding can be difficult, requiring you to raise funds for your business. However, without proper knowledge about different startup funding stages, you may face challenges in securing the right amount. 

But there’s nothing to worry about! This article is your complete guide to the different startup funding stages and how to navigate them. Let’s dig in!

Different Startup Funding Stages 

The startup funding journey starts from a pre-seed round and goes beyond series C. Here’s a detailed overview of each stage:

Pre-Seed Round 

The pre-seed round is the first startup funding stage. It usually happens when there’s no practical product or service, but a prototype or idea is present. You can expect funding of $10,000 to $100,000, and most of this either comes from your own resources or friends and family. However, during the pre-seed round, you have to ask yourself a few questions:

• What is the solution that you are offering?
• What market opportunities exist around the solution you’ve proposed?
• Who else is offering the same solution as you?
• How are you better than what’s already available in the market?
• How much money or resources do you need to bring your ideas into reality?

The main goal of pre-seed funding is to equip the company with enough resources to create a minimum viable product (MVP) and help explore the challenges ahead. 

Seed Round 

The next one in the startup funding stages is the Seed Round. Most of the seed rounds are funded through angel investors, crowdfunding, and venture capitalists. 

It’s in this stage where you actually lay the foundation for business growth by raising your first official capital. You develop your product, refine your business model, and start building your customer base, finding product market fit. 

Generally, this round allows you to secure funding between $500,000 and $2 million. It’s beneficial for both the startup and the investor, who often receive a small portion of the company’s equity in exchange for their investment. 

Series A and B

Series A and B are another one of the critical startup funding stages. While pre-seed and seed rounds were about exploring your startup’s approach and validating the idea, Series A and B demand you to execute everything. 

The competition at this stage is fierce, as about 60% of companies that raise pre-seed funding fail to make it to the next startup stage, Series A. So, you have to focus on executing a go-to-market strategy and growing your revenue. 

You have to show and convince investors why they should consider funding your idea and how their capital will accelerate your growth. During this round, you can expect funding ranging from $2 million to $10 million from venture capital firms. 

Series C

Series C happens when you have successfully expanded your business to a certain level and are looking to scale it further. For instance, you are generating stable revenue and have established yourself as a credible business in the eyes of the customers, gaining investor’s trust. 

During Series C, startups can raise an average of $26 million from VCs, private equity firms, growth firms, or corporate VCs. This funding is then utilized to develop and launch new products as well as penetrate different national and global markets. 

Initial Public Offering (IPO)

This is the last one from the startup funding stages. In this, the businesses go public, inviting the general public to buy stocks in them. 

It allows you to raise huge capital to grow your business and achieve a high return on investment. However you should know that doing an IPO is quite complex as you have to navigate and comply with government regulations. 

Conclusion 

It’s important to be aware of the types of startup funding stages to make sure you secure the right funds at the right time. For this, you can consult industry experts and other fellow business owners before your early-stage startup funding so you can attract potential investors to fuel your startup growth.