ABC of Startup Funding

“STARTUP” IS THE LATEST BUZZWORD

Everyone wants to launch a startup, hoping to strike it rich with the next big idea. However, it’s important to understand that every new business cannot be called a ‘Startup’.

Unlike a typical small business that only aims to sustain itself and provide a livelihood for its owner, a startup aims to multiply and become a major player in its industry, competing with Reliance, Tata, Meta, and other established giants.

Startup funding should be pursued only by businesses with a clear vision and desire to become big players in their respective markets.

To secure the necessary funding, startups often have to go through different funding stages. If you wish to own a startup, you must know how the Startup funding begins and reaches its final destination.

WHAT ARE THE SEQUENTIAL STAGES OF STARTUP FUNDING?

(i) Bootstrapping –

Startups usually begin their journey with the founders investing their savings in the business. It is also important because how will you convince the investors to put in money if you are not willing to bet on yourself?

Next comes family, friends, and relatives. If the idea is promising and the founders have a strong network and credibility, they may be able to secure initial funding from their network.

This form of funding is commonly known as bootstrapping.

(ii) Seed Funding

Seed funding is the infancy stage of a startup, where money is required to further develop the idea.

To secure seed funding, startups often turn to angel investors, who are high-net-worth individuals that invest in early-stage startups in exchange for equity.

Securing seed funding can be challenging, as investors are taking a significant risk in investing in a new and unproven idea, which is also why these investors are ‘angels’ for Startups.

(iii) Series Funding

At this stage, your product has picked up demand, and you are seeing a consistent revenue stream.

You are looking for expansion, and this is the stage where some serious funding is involved.

Here come Venture Capitalists, Private Equity Funds, Hedge Funds, and Banks.

The series goes like Series A, B, C, D, etc. As we progress in the series, the startup’s valuation increases, and so does the funding amount.

With each round, the equity percentage available to dilute decreases as the business’ valuation increases. One of the most probable matrices of valuation and funding is as below:

Series	Valuation	Potential Investors	Funding	Popular VCs in India
A	10M$-15M$	Venture Capitalists	2M$-15M$	Sequoia Capital India, Fluid Ventures
B	30M$-60M$	Venture capitalists, Late-stage venture capitalists	7M$-10M$	Kalaari Capital, Matrix Partners india
C	100M$-120M$	Late-stage venture capitalists, private equity firms, hedge funds, and banks.	30M$-100M$	Nexus Venture Partners, Venture Highway
D	1 billion and above	Late-stage venture capitalists, private equity firms, hedge funds, banks	$50-$60 million	VenturEast, Axilor ventures

(iv) IPO

It is when the company goes public and gets itself listed on a recognised stock exchange. Startups can file for IPO right after Series C funding and not go for Series D funding.

DO YOU REALLY NEED A STARTUP CONSULTANT TO OBTAIN FUNDS?

Startup consultants are very helpful for startups in raising funds and managing their finances.

They can guide startups from the early stages of idea generation and business model planning to the later stages of raising capital and preparing for an IPO.

Some ways in which financial consultants can help startups in fundraising include-

• Identifying the right investors
• Preparing founders for the grilling of investors and guiding them during the deal to get them the best deal
• Raising debt facilities and providing active management and advisory services (also called Virtual CEO, CFO, and Other Management Personnel Services)
• Assist startups in raising funds from venture capitalists by helping them with the necessary groundwork and preparations, thus simplifying the fundraising process.
• Preparing necessary documentation such as pitch decks, financial models, consumption models, investor memorandum etc.

Startup owners are daredevils who seek to differentiate themselves from traditional businesses. While bootstrapping a startup may appear easier initially, complexities arise as you progress.

Often, people seek financial consultants when it’s too late, and some even give up, believing they won’t be able to overcome the challenges.

Hiring a Startup consultant from the inception of your startup always helps.

At Masterbrains, we have a proven track record of consulting startups, assisting them in guiding during ideation, preparation of business plans, marketing plans, logistics plans, financial models, business model, finding investors, creating a persuasive pitch deck, covering all the taxation and legal bases and providing all the necessary support.

Our services extend beyond fundraising and encompass marketing, recruitment, business plans, and networking. We aim to assist you in becoming a thriving and prosperous business; with Masterbrains by your side, you can confidently and correctly take each step towards this goal.