Far more than just a fantastic idea, A startup necessitates a significant amount of time, discipline, devotion, and, most importantly, funding. According to a 2016 British Business Bank survey, more than 60% of startups require external financial rounds to establish a firm foothold in the market. 

Regardless of its disposition or size, every startup requires funds to turn its innovative ideas into reality. The majority of companies and startups fail due to an inability to raise sufficient money at the right time. A startup undergoing rapid expansion goes through the following funding stages:

1. Pre-seed Funding

Startup Valuation: $10k-$100K

Fundraising: $50K

This initial seed funding stage occurs so early in the process that it is not even considered a part of the startup funding stage. The pre-seed financing stage generally depicts the time when a startup is getting its operations up and running. 

During the pre-series funding stage for startups, it is highly improbable that investors will invest in exchange for equity in the startup. Startup founders invest from their own pockets to grow their businesses in the most creative way possible. This is what we call bootstrapping. 

The duration of this stage is determined by the characteristics of your startup and the initial costs that must be considered while developing the business model. Entrepreneurs should seek guidance from founders who have gone through the same experience and work on building their product or service effectively. Besides, this stage can also be utilized to build partnerships, work out copyrights or other legal issues to prepare yourself early on. 

2. Seed Funding Stage

Startup Valuation: $3M-$6M

Fundraising: $3M

Around 29% of startups fail because they run out of capital while bootstrapping. Once they have a solid idea, these businesses need to find external funding to scale. During this phase, the owners try to raise funds to conduct market research and learn more about the tastes and preferences of their target customers. Also, this is the startup funding stage at which the product is truly launched and is developed to release in the market. 

3. Series A Funding

Startup Valuation: $10M-$30M

Fundraising: $15M

The Series A stage is the initial round of venture capital funding. The startup ought to have a working model and a client base with a consistent revenue flow by this point. It is now time for them to look for series A funding and improve their core competencies. This is a fantastic opportunity for startups to expand into new markets.

The major part of Series A funding is provided by investment companies and conventional venture capital firms. They are not looking for great ideas but rather for startup companies with a strong business strategy plan that can turn their great idea into a successful, money-making organization that will allow the venture capitalists to profit from their investment.

4. Series B Funding

Startup Valuation: $30M-$60M

Fundraising: $30M

Startups that have already gone through the prior startup funding stages (seed funding and Series A) have built a sizable user base and a consistent revenue stream. They have illustrated to their investors that they can achieve success on a greater scale.

Investors help startups broaden their horizons by funding market reach activities, increasing market share, and forming operational teams in marketing, business development, and customer success. The series B funding stage enables startups to grow to meet the various demands of their customers while also competing in competitive markets.

The Series B startup funding stage may appear identical to the earlier funding stage methodologies and key players. However, the same characters frequently lead Series B funding, including a key anchor investor who helps you attract other investors. The main difference is the inclusion of a new wave of venture capitalists specializing in investing in well-established startups to help them exceed expectations even further.

5. Series C Funding

Startup Valuation: $100M-$120M

Fundraising: $50M

Companies are typically expected to create new products, enter new markets, and even ensure that competitors do not meet the expectations of comparable new business deals during this stage. They might even buy out other startups.

Startups seeking Series C funding are well-established, have a strong customer base, have stable income streams and a track record of growth, and want to expand their operations on a global scale. Investment banks, hedge funds, and private equity firms appear during this stage as the business becomes more stable. Series D, E, F, and so on could be added to the funding.

A startup is growing and looking to scale significantly with a commercially available product at this stage. Even if the venture is not yet profitable, income should regularly come in. The funds raised at this point will be used to plan big for your startup, mergers and acquisitions, or prepare for an IPO. 

6. IPO

Startup Valuation: $100M

Fundraising: $50M-$500M

If a company decides to sell corporate shares to the general public for the first time, an IPO, or Initial Public Offering, occurs. When a startup decides to go public, it must put together an external public offering team that includes underwriters, legal professionals, certified public accountants, and SEC experts to compile all necessary administrative and financial documents.

If the founders decide to go public, they are not required to disclose their financial statements. However, the company must submit information to the SEBI regarding financial statements, the purpose of raising funds, etc. An IPO aims to help you grow and diversify in areas of interest. Some advantages of an IPO include increased funding for growth, better talent retention, and a smoother path for future M&As.

Conclusion

Entrepreneurs can scale their startups at any phase of their entrepreneurial journey, thanks to the various startup funding stages. This scaling practice enables them to ascertain where their startup continues to stand and which potential investors would invest in them to help it grow. Entrepreneurs can thus plan their business objectives accordingly. 

Remember that startups must be mature enough to qualify for specific funding round to receive funding. The net worth of your startup can tell you where it stands.