You may have a brilliant idea that can take the world by storm. But, if you want to monetize it, the process can be quite complicated. Launching a business needs much more than a great idea. It requires time, dedication, discipline and – most importantly – money.
Your idea may be great but it’s pretty unlikely that you’ll get people dying to financially back you up. However, it’s pretty likely that your business idea goes through various funding stages based on several factors that may include your track record, potential market size and overall risk.
Note: whatever stage your business is in, MoneyTap’s personal loan for business can be used as a fund option.
Let’s quickly review the various stages of startup funding:
- Self-Funding or Bootstrapping
Your startup idea at its initial stage may need a little investment. At this point, self-funding or bootstrapping may be the only possible funding option.
Assess your investments and savings and figure out how much you can contribute from your own pockets. If required, approach your family or friends; they may give you a loan at a cheaper rate. If asking for help embarrasses you, consider taking a personal loan for business to get your business off the ground.
- Seed Capital
The funds raised at this stage is used for market research and product development. Your funding options at this stage are:
- Your personal savings
- Credit cards
- Loan from friends and family
- Personal loans for business from banks and online lenders
You can continue bootstrapping or begin looking for opportunities to secure investments from grants, angels and (Venture Capital) VCs.
- Angel Investor Funding
Seed capital is often limited. Therefore, it is necessary for you to derive wealth from individuals other than your family and friends. These wealthy people are called Angel Investors. An angel investor gives you the money as a loan which is later converted to stocks or translates into VC Series A funding.
Note: Your friends and family can also participate in the angel round of funding.
- Venture Capital
Once your products or services reach the market, even if your business isn’t making any profits, venture capital funding can be your option. Venture funding involves multiple rounds of funding.
Series A
This is the first round of VC funding. At this stage, the funds are used for marketing, tapping new markets, improving your brand credibility, and helping the business grow.
Series B
When the business reaches Series B investment, that means people are actually buying the product and services. This type of funding helps the business pay salaries to staff and hire more if needed. Thus, the company improves its infrastructure and establishes itself as a global player.
Series C
Although a startup can receive as many investment rounds as possible, during Series C investment, the investors as well as the owners, are cautious about funding.
Note: The more investment rounds you receive, the more you release your business equity.
- IPO (Initial Public Offering)
When a startup decides to go public to raise funds, it typically does it by selling its shares. In IPO, the general public invests in the business by buying its stocks. IPO helps businesses to grow and diversify in other preferred areas.
For taking your startup to the next level, you should be clear about which stage you need the funding for and for what purpose. The right decisions made at the right time can be profitable for your business.
It is recommended to keep a personal line of credit for business handy while you are going through these various crucial stages of startup funding. MoneyTap’s personal loan for business offered to you in the form of a personal credit line can be your support whenever you are in need of cash.
Author bio:
Shiv Nanda is a financial analyst who currently lives in Bangalore (refusing to acknowledge the name change) and works with MoneyTap, India’s first app-based credit-line. Shiv is a true finance geek, and his friends love that. They always rely on him for advice on their investment choices, budgeting skills, personal financial matters and when they want to get a loan. He has made it his life’s mission to help and educate people on various financial topics, so email him your questions at shiv@moneytap.com.