This prime stage of seed funding falls so early that it’s not even considered as a startup funding. The pre-seed funding stage generally refers to the time period in which a startup is getting their operations off the ground and the founders are working on another job and investing their time in realising their startups future from ideation.
Startups who are at the pre-seed funding stage investors are by startup owners, friends and family or an angel investor or early stage venture capitalist.
This is the stage where startups really begin bringing in the capital they need to make a go of their business idea. Funding at this stage may come from angel investors, targeted funds, and even accelerators and incubators who may provide the initial needed startup capital.
As Startups reach to their maturity stage, equity financing plays a role in terms of selling ownership shares in return for funds, which typically, means the percentage of the company’s shares that a startup is willing to sell to investors for a specific amount of money.
Startups can borrow over a fixed amount of time from banks. Loans can be secured or unsecured – if secured, borrowing against something you own, such as a house. Thereafter additionally have to pay interest on the loan, bringing up the total cost. While startups are compelled to make profits in respect of repayment of the loan.
Once a startup makes it through the seed stage and they have some kind of traction — number of users, revenue, achieving their key performance indicator (KPI), they’re ready to raise a Series A round to help lift them to the next level. This stage goes from Series A to Series E, depending on the financing requirements.
IPO is the process of offering corporate shares to the general public for the first time.