Getting funding is one of the first — and potentially most important — financial decisions many business owners make. There is no one-size-fits-all solution, but with a well-thought-out plan and the right resources, it’s possible to get your startup off the ground.
Startups need capital to purchase equipment, rent space and hire employees. The initial capital they raise is called seed funding. It’s typically enough to keep the company going for 18 to 24 months.
The next phase of startup funding is Series funding. The money raised in this round is larger than seed funding, ranging from $2 million to $15 million. In this stage, investors are looking to see a clear business model and significant traction. They may also want to see a more defined exit strategy (either an acquisition or public IPO).
A startup’s final phase of funding is Series C, which is used for scale-up operations and growth. This stage can put immense pressure on the startup to grow quickly, which can lead it to make decisions that prioritize short-term gains over long-term sustainability. It’s also challenging to maintain the original startup culture at this stage.
In the event that outside investors aren’t a viable option, it’s possible for startups to obtain grant funds. These can be awarded by government agencies, foundations and private entities. They don’t require that companies repay them or give up any equity, so they’re best suited for startups focused on research or social causes.