Research conducted on small businesses by Investopedia revealed that most businesses failed due to lack of capital.

Like breath is to humans so is cash to a business.

We live in an economic world, governed and maintained by cash flow and this is the same for business. An essential worry for founders and startups is fundraising. Startups need money to run.

No startup in the history of the world can raise money just to get going unless you are Elon musk, or Mark Zuckerberg, no one is going to give anybody money just to start something. If somebody is going to take a risk they are going to take a risk on a person that has experience.

(Paul O’Brien, CEO of media Tech Ventures)

What is startup funding?

Funding is the process of acquiring money required to start a business. With startups, this could be seed funding, organic funding, or series funding depending on the business model.

When startups receive funds from accelerators in an exchange for a percentage of the company it is referred to as equity. When funding is made in a formal way to address the specific needs of the business it is referred to as a funding round. These could be from angel investors or venture capitalists.

Funds for startups can be used for Market research, registration or incorporation, Hiring, office, product development, marketing, sales, network building, inventory, legal and consulting services, licenses and certifications.

Money-related matters are never as easy as they seem. Most especially when you have decided to raise funds from outsiders. Startup funding only works when you have a good idea. In my interactions with investors, I discover that they are particular about founders having a real idea so before you go fund- seeking ensure you are solving a real problem.

How Startup Funding Works

Crowd investing, also known as equity crowd, startups use this medium to raise funds from investors for a portion of their company. Crowd investing happens on a platform where private businesses create a profile including their pitches and other relevant information. These platforms charge a fee from founders, while others charge when a startup gets funded. Crowd investing allows you to take capital debt free.

Series A. Before a startup can access this round of funding, it has to have a starting product or service. Pre-seed funding. This is the earliest form of financing for the business. It is kick-started with the founder's savings, finding from family members and close associates.

Series funding

Series A. Round startups are expected to have a plan for developing a business model. The funding raised at this point is expected to increase the business revenue by £2M to 14M. It comes from venture capital firms.

Series B. startups eligible for series B round has already found a market-fit product and have needs for expansions. They are given around £7M to £10M companies can expect a valuation of £30 million and 60m valuation. They are often gotten from venture capital firms and investors who led the first round.

Series C. This funding is for startups doing well and is ready to expand to new markets, acquire other businesses and develop new products, about £26m is raised. Valuation often falls between £100-120m. It comes from venture capital firms that invest in late-stage startups, private equity firms, banks, and hedge funds.

Most companies stop at series C however, some raise D and E for the following reasons:

  1. They want to stay private longer.
  2. They need a little help before giving public.
  3. They have failed to meet expectations.

Finding a startup is worthwhile as they contribute to job creation and have a huge impact on total economic growth.