If you are a Start-up owner, you may find it difficult to raise your money and ensure your start-up success without any outside help from sponsors, as they provide you with much needed money in exchange for getting some excellences like ownership and equity.

So, Here we introduce a guideline to identify the several faces of Funding and how to get one of them as a start-up owner just in case you want to raise your money and achieve accomplishments for your company. 

 

Family, friend and fools fund

 

 

Every year 35 - 40% of Start-up companies receive their capital from family members and friends, as it’s an easy, friendly and flexible way to start your own project. For the term “fools”, it expresses the potential risks related to funding the beginnings of the business. Concerning this type of funding, there are some other terms concerning this stage of funding you must know Such as:

 

Pre-seed: which means the extremely early beginnings of the business when it needs a very low amount of funding around 50K - 250K.

 

Angel/ Seed: which means that the early sponsors of the business are interchangeable as it helps nourish the start-up ,as a plant, to grow and develop. 

 

After seeding the plant, what’s next?

 

 

We can divide the upcoming step into 3 stages as stages Series A and Series B focus on investments to grow and develop the business, its operations and its customers. For stage C, it concentrates on how to keep your growth and establish more companies.

 

Series A: After ensuring that business goes perfectly and profit increases, the investors search for another type of funding which is Series A to find creative companies that meet their creative ideas. It’s known that this stage has an average over $14 million which is equivalent to 4x the average of family, friends and fools fund.   

 

Series B: It seems similar to Series A. It also relies on targeting new customer base and advanced operations, besides it aspires to invest large amounts of money in cooperation with other investing capital firms for the later rounds.

 

Series C: In this stage, companies with real success and measurable accomplishment tend to find extra funding in the purpose of achieving more successful steps and widening customer bases through developing new products and expanding into new markets. 

 

Private Equity: It's considered one of the later rounds of funding and it's used as a term to express funding from equity firms. This round is less risky in comparison with the former rounds because the companies which follow it, are established and stable at the point of funding. In other words private equity is composed of investors who invest in private companies and funds introduced to them.

 

Other types of funding:

 

 

There are less common types of funding like:

 

Series D: It's less common than Series C and companies usually rely on it in two main cases, the first one when they want to achieve their rest targets and improve the value of their business before pushing to IPO.

 

Debt Financing: In this case the donor of financing, whether they are individuals or institutes,   doesn’t get a stake in the company. They are just creditors who lend the fund and await  repayment of it with added interest instead. 

 

  

Stock Issuance: It’s the maximum number of shares, including those sold to the public for raising capital, that are provided to shareholders of private and public companies. In addition to these which are considered part of benefits and compensations for insiders. 

 

Convertible Note: It’s a short-time debt which converts into equity or shares and that’s different from receiving money back with interest from investors. It’s sometimes thought of as an in-between round that helps businesses reach the next funding round.

 

Finally, maybe you find this topic kind of difficult to understand obviously. So, we hope all of the above definitions help you to know about Funding types simply and clearly.