Funding: Easy but tricky way to track

Every decision you make in business has a financial consequence.

Entrepreneurs are full of great ideas and powerful ways to implement them, but like anything in life, starting a new business and running the same requires a hefty stack of cold, hard cash. Funding: Easy but tricky way to track.

One of the biggest challenges for entrepreneurs and small business owners is finding the funds necessary to launch and eventually grow their businesses.

At one time, gathering this cash required hours of traipsing business plans to one investor after another, hoping one would be interested enough to invest. This approach often took years and yielded disappointing results.

Whether you’ve been in business one week or five years, an infusion of money is always welcome. But what type of fundraising is best for your business? There are so many factors to consider from the stage of your business to how much it will cost to get the money that just choosing a path to raise money can be overwhelming.

 

Funding is not a one step process. It has different stages. Remember each stage have different stroke too. The stakes change as the levels and rounds change.

 

Before we move to rounds of funding, don’t forget that

• In each stage, at least one extra parameter gets added
• At every stage it is very important to define your goals for the next stage of funding.

 

SEED FUNDING (Idea Stage)

At first it is just you. You are pretty brilliant, and out of the many ideas you have had, you finally decide that this is the one. You start working on it. The moment you started working, you started creating value.

Usually you can’t tell ahead what will make a specific investor more excited (or less) about you and your startup. Some will be concerned about minor things that others won’t pay attention to. Some will be fully excited about things that you won’t consider that important.

 

SERIES A FUNDING

Progress from Seed round valuation – Now goal is to remove some major element of risk. That could be hiring a key team member, proving that some technical obstacle can be overcome, or building a prototype and getting some customer reaction.

Valuation of start-ups in this series is done on the basis of:

• Proof of concept
• Progress made with seed capital
• Quality of executive team
• Market size
• Risk involved

Series A round of financing is generally done when company is generating some revenue. The risk involved is at the highest in this round of funding.

 

VENTURE CAPITAL

 Start up companies with a potential to grow need a certain amount of investment. Wealthy investors like to invest their capital in such businesses with a long-term growth perspective. Such investments are risky as they are not liquid, but are capable of giving impressive returns if invested in the right venture. Venture capitalists have the power to influence major decisions of the companies they are investing in as it is their money at stake.

 

GOING PUBLIC

Technically an IPO is just another way to raise money, but this time from millions of regular people. Through an IPO a company can sell stocks on the stock market and anyone can buy them. Since anyone can buy you can likely sell a lot of stock right away rather than go to individual investors and ask them to invest. So it sounds like an easier way to get money.

In an IPO, the issuer obtains the assistance of an underwriting firm, which helps it to determine what type of security to issue, the best offering price and the time to bring it to market.

 

Things which may turn the funding the fun way:

• The founders and the team are pivotal in any stage of investment. They need to convince and conceive what normal people just cannot.
• Working efficiently during high pressure.
• Learning ability at every stage.
• Clarity in vision

 

Not to forget that every time you get funding, you give up a piece of your company. The more funding you get, the more company you give up. That ‘piece of company’ is ‘equity.’ whenever you give it they become a co-owner of your company.

 

You need enough money to fund your passion. And if you achieve that, and follow your passion with diligence and intelligence, it will ultimately fund you.

 

For any assistance visit: taxmantra.com