#SmallBusinessAdvice

An Overview of Business Funding Rounds

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Quick question: Can you let me know what’s on your mind right now when you hear the magic word ‘funds’? 

Is it a tin can with a small slot at the lid to put money in for donation? 

Is it the money that you’ve saved up for your trip to Europe?

Is it the amount of money that you’ve saved for investment? Or maybe to start a business?

Hey there, are you a business owner who plans to expand your business or company but don’t have the resources to do so? Or are you trying to collect money to finally kickstart that business idea you’ve always had? 

Do you believe that with enough money you can drastically change your life or business for the better? Well then, you’d probably need ‘funding’ for your business!

What is funding?

Funds bring about different meanings for different people. Nonetheless, they all generally point to the same thing. Money. 

Funding in short means the provision of money to a business. It’s the financial resources that an investor provides to a business to help achieve its goal. 

To businesses, ‘funds’ can also mean a new beginning, an opportunity, growth, expansion or even prevention. And for many new startup companies, a business’s ability to collect funds may play a significant role to survive or prosper in this competitive business environment. 

As you may have known, a new business or company will face many issues and obstacles that require a significant amount of money to solve. Naturally, as startups, these businesses do not have the resources to solve these problems independently. 

Thus, in comes the need for funding. The money that is raised by a business will be used to jump-start and keep the business running until it starts to generate money to keep them on its feet.

5 Stages of Business Funding

Different Stages of Funding

If you didn’t know, funding has different rounds or stages. We can determine the funding stage of a business depending on the business’s current lifecycle when they are trying to raise funds.

Pre-seed funding

Preseed funding is the earliest stage of getting funds for your business idea. 

You’re trying to convince investors to invest in your ‘idea’ that you have. It’s described as a challenging task to do as you don’t have any written proof or numbers that can prove that your business idea will be successful or sustainable in the future. 

Pre-seeding funding is described as challenging as it’s telling investors to invest in a dream with no solid evidence. In this stage of funding, an entrepreneur will need to heavily rely on their persuasion and projection skills to attract investors. 

You will need strong soft skills to convince and persuade investors that your idea will be the next big thing. However, the reality of this funding stage is that your potential investors will mostly only be your friends and family.

However, you can always try to look for startup incubators or government grants that are available to propose your thoughts. So it’s always better to prepare yourself with a complete business plan to bring to officials to pitch your business idea to them.

Seed funding

Seed funding is also known as the first formal funding for a business. If you’re in this stage of funding, you’ve already successfully started your business and got all the required licenses to start your own business. 

In this stage, you will be trying to acquire funds to develop the product or service that you’ve proposed in your business plan or to the investors.

Starting a new business means that you will need to hire employees. This fund will be also used to assemble a small team of experienced and high-quality staff to help jumpstart your business’s daily operations. 

The funds raised will also be utilised by your business in acquiring your first few customers to get your cash flow’s gears spinning. In other words, these funds will help you start generating revenue and profit for your business.

Series funding

1. Series A funding

After the seed has sprouted, we enter the Series Funding Stage. As you may have guessed, series funding starts with ‘A’. 

If you’re looking for Series A funding,  that means your business has already established itself in the market but requires more funds to further develop its products to increase sales. 

In this stage of funding, a business plan is essential to attract investors. This is because investors will aim for enthusiastic and excellent companies with a clear vision to make the investment successful and worthwhile. 

So it’s common to see most companies that do not perform will fail to pass the Series A funding stage and end their business journey here. 

2. Series B funding

If you’re a business looking for series B funding, that means you’ve already found your place in the market for your product and are doing well. You will need to prove that your company already have a sufficient, strong and diversified customer base. 

If you’ve proved your point, you can ask for financial aid from the investors to scale larger and further enhance your business. In this stage of funding, financial aid is normally required from the investors to support big projects such as business development, sales and tech support, advertising or even further talent acquisition for a business.

3. Series C funding

After being through so much hardship, are you still thinking of expanding even larger? 

Well, if that’s the case, welcome to Series C funding!

With Series C funding, you can help your business raise sufficient funds to bring your product or service out of your country to even further increase your company’s value before going public to the stock market. 

When your business is considering Series C funding, your business already has high value and is performing very well. You can no longer refer to yourself as a ‘startup business’ anymore as you’re already a well-established business and have a major impact on your market. 

As you may have noticed, the more mature a business is, the further it progresses through the funding stages. Some companies go beyond Series C to Series D or E or even further funding stages. Businesses will do so if a new opportunity such as a business merging emerges or if the business did not hit its goal.

However, the rule of thumb is that Series C funding mostly is a conclusion for a company’s fundraising journey before it goes public.

Where Is the ‘Fun’ in Funding?

Raising funds for a business is never an easy task. However, if you’re successful in doing so, you’ll walk away with a better opportunity or even a second chance for your business. 

With that said, the funds that you’ve acquired from the investors will also give your business more pressure as you’ll need to work even harder than ever to fulfil the promise made to the investors. 

Your business must be able to show results to the investors to prove that they made the right choice investing in your business.

However, do take note that if you’re operating an enterprise (Sole Proprietorship or General Partnership), it will be much hard to collect funds compared to a company. As investors will be hesitant when it comes to dealing with enterprises instead of companies. Curious to know why? Click here to know more!