In the years between 2010 and 2020, the world saw a huge rise in the number of startups that came up. New startups, both small and medium in size, were mushrooming all over the world. The potential in most of these startups has, in fact, made them quite famous, and many of them were successfully acquired by large firms, and some became listed companies by themselves.
For someone with a great idea and potential, a startup might be something that shoots them to fame. But the challenging part is to find funding for startups in this age and time where the economy is in a slump and investors are varied on their penny.
Finding the right means of investment and the right source is crucial for any startup, not only at the beginning but throughout the lifespan of the business. Even when businesses have grown global, there will still be a need for funding, and that is when companies offer IPO and become listed.
Startup Funding Requirements
Funding for startups is needed at every stage of business growth and expansion. Various levels of funding have various needs for money which includes seed funding, establishment cost, marketing costs, advertising costs, production costs, logistic costs, expansion costs, asset purchase costs and day-to-day expense costs. All these financial costs need to be met from time to time so as to help the company stay afloat and manage its expenses.
There are 5 preliminary stages that every business will go through, and at all of these stages, various kinds of funding for startup business options will need to be approached. Below are the 5 stages of a business where a businessman will need to look for funds:
1.The Initial Stage
At this stage, the business is just an idea. The owner or the partners of the startup will need to come up with their own money or borrow money from friends and family to help set up the preliminary planning and draw out a business plan, financial plan and marketing plan so as to get further funding.
2.The Seed Stage
At this stage, the business is more than just an idea. The initial research and development for the product or service are underway, and the plans are all ready.
At this stage, the business or startup may approach outside investment, such as angel investors or take out a business loan from government funding or private bank funding. Angel investors are an ideal choice as they invest in startups and potential businesses at the seed stage for an equity stake in the business.
3.Growth Stage
At this stage, the startup is growing, and production is underway. The market response to the product or service is also improving. The startup must invest in production, buying machines and utilities and in marketing. At this stage, approaching a VC board would be ideal as they invest in good and potential startups at the growth stage.
4.Expansion stage
At this stage, the business is going in for series funding that is required for various targeted expenses like asset accumulation, expanding into new geographies and markets, introducing new products, etc.
5.IPO
Once the business has reached full maturity, it is time to list the company and sell shares as part of IPO for global growth and expansion. IPO helps in building a reputation of the brand, which in turn helps in further growth of the business.
