Startup Funding and Stages

Startups investments are broadly categorized in 5 stages or a startup company’s growth journey passes though these stages -

-          Seed stage

-          Angel investment

-          Venture capital funding

-          Private Equity Investment

-          IPO

Seed stage

With context to Indian scenario, Seed stage funding is done by self from savings, family, friends, educational institutes or HNIs in personal network. This is done at idea stage where product in on paper or a blue print is ready. This may range from Rs. 1 lakh to around Rs. 20 lakh.

Angel investment

Startups that have built-up a product and commenced sales or have active users on platform may qualifies for Angel Investment. If the product is innovative and disruptive it is evaluated by Investors on various parameters like revenue model, scalability, team, technology, etc. is

Participation in angel investment round is done by angel network, accelerators, small VC funds, HNI, Corporates, professionals. Ticket size in this round varies from Rs. 25 lakh to Rs. 3 crore.

Venture capital funding

Once the startups reached traction in business and for business growth & expansion if needs Venture capital funding. The objective can be to enhance technology infrastructure, hiring experienced team, marketing, optimizing operations capabilities, etc. a typical VC fund invests above Rs. 6 crore.  

Venture Capital involves money being provided by investors to start-up firms and small businesses with perceived, long-term growth potential. This is a very important source of funding for start-ups that do not have access to capital markets. It typically entails high risk for the investor, but it has the potential for above-average returns.

Private equity (PE) funding

PE funding is money invested in companies that are not publicly traded on a stock exchange or invested as part of buyouts of publicly traded companies in order to make them private companies.

These are very large size funds that invest in companies that are having very competitive product, excellent management board, growing very fast and may have prospects to list on stock exchanges or doing global business.