The second in a series of articles looking at startups and fundraising in my capacity as an Ambassador for Funds Sniper; a search engine for PE and VC funds. Jean-Baptiste (JB) Déal, Principal Consultant & CEO, Avantagents and Funds Sniper partner helped check this article prior to publication.
Are you a founder looking to scale your startup to new heights? Or, perhaps, you are new to the startup world and navigating the complexities of fundraising is a complete mystery to you.
This post aims to demystify the various stages of fundraising and to help you to understand the jargon used to describe startup financing.
The Fundraising Struggle Is Real
A chance remark at a finance industry panel triggered my journey of discovery to understand the challenges and pain points associated with startups and fundraising.
It only took me a short while to discover that unless you have a finance background or know someone who does, the struggle to identify potential investors is all too real.
The process of identifying investors who match with your business, crafting a compelling approach, determining the funding amount, developing a persuasive pitch deck, delivering presentations, and subsequently awaiting a response is time consuming, stressful, and takes a mental toll.
A quick trawl through social media message boards and communities, it's clear that many founders are grappling with the challenges of seeking funding while simultaneously striving to sustain their startups.
Even though substantial funds are readily available and waiting for those and other founders.
According to Visual Capitalist, investors have squirreled away US$6.1 trillion in money market funds. The Financial Times says venture capital firms and other investors have US$311 billion in unspent cash that could be invested in startups (source).
- Related post
Finding Funding
Explained: Startup Funding Stages and Options
There are many funding stages and options for fundraising out there, and I've attempted to unmuddy the waters the following list:
- Bootstrapping
Self-funding the business. Funds provided by the founders or through the revenue generated by the business, avoiding external financing. - Pre-Seed Funding
Initial capital to start the business. Funds used to develop the idea, conduct research, and create a business plan. - Seed Funding
Early-stage capital to develop the product with funds used for product development, market research, and building the initial team. - Series A Funding
Funds used for scaling the product, expanding the team, and refining the business model. - Series B Funding
Growth capital to scale operations and expand market reach, enhance product features, and increasing sales efforts. - Series C Funding
Capital to expand and used for large-scale expansion, entering new markets, and potentially acquiring other companies. - Series D Funding
Funds used for scaling even further, preparing for IPO, or addressing specific late-stage challenges.
If you're curious (like I was) about the average dollar amounts raised in Series A to D funding rounds, I could only find data for the U.S. market. Bear in mind, these figures are just general averages and figures vary depending on the industry, growth stage, market size, competition, and more.
- Series A: US$2 million - US$15 million (average)
- Series B: US$10 million (average)
- Series C: US$20 million (average)
- Series D: US$50 million (average)
[Sources: Investopedia, JoinARC, Startups.com, and Visible VC]
Other Forms Of Financing
While Series A to D funding rounds are commonly associated with startup financing, the funding landscape has many other forms of financing, including (in alphabetical order):
- Angel Investors
Ultra / high net worth individuals who invest in early-stage startups. - Bridge Financing
Short-term capital used to bridge the gap between larger funding rounds or to address immediate financial needs. - Corporate Venture Capital
Investment from larger corporations that see strategic value in the startup. - Crowdfunding
Raising funds from a large number of individual investors through platforms. - Crowdsourced Lending
Peer-to-peer lending platforms that connect startups with individual lenders. - Debt Financing
Funds borrowed from banks or other financial institutions, to be repaid with interest, without diluting ownership. - Equity Crowdfunding
Raising funds from many investors through online platforms. - Family Offices
Private investment firms that manage the wealth of high-net-worth families. - Grants
Funding from government programs, foundations, or other organizations. - Incubators and Accelerators
Programmes that provide funding, mentorship, and other resources in exchange for equity. - Initial Coin Offering (ICO)
Raising funds by issuing cryptocurrency or digital tokens. - Initial Public Offering (IPO)
Public offering to raise capital by offering shares to the public, typically used for significant expansion and to provide liquidity to early investors. - Micro-VCs
Smaller, more specialised venture capital firms that focus on early-stage startups. - Revenue-Based Financing
Funding based on a percentage of the startup's future revenue, rather than equity. - Venture Capital Firms
Professional investment firms that provide funding in exchange for equity. - Venture Debt
Loans from banks or specialised lenders, often used to bridge the gap between funding rounds.
About Funds Sniper
Full disclosure: I am an Ambassador for Funds Sniper
There is a simpler way to find funding for your startup and that's through Funds Sniper.
With access to over 18,000 Private Equity & VC funds globally and information on more than 20,000 fund managers, Funds Sniper is one of the largest search engines in the sector on a global scale.
Funds Sniper's platform allows startups to find suitable Private Equity & VC funds as potential investors, growth-stage companies to secure funding for expansion, and M&A professionals, financial advisors, and funds of funds to identify relevant funds for their clients' needs or investment portfolios.
For a preferential rate, enter amb-ogFFA
About Me
With over 30 years of experience in the Asia-Pacific PR industry, I have successfully led impactful campaigns for startups and multinational corporations alike. Fundraising is an area of interest, and I recently became an Ambassador for Funds Sniper, a unique global search engine of over 18,000 PE and VC funds.
Go to www.fundssniper.com and enter the code amb-ogFFA for a preferential rate.