The funding landscape can be tricky for startups to navigate. Some funders are willing to get behind very early-stage startups, while others are much less inclined to do so.
To effectively manage your fundraising efforts, it’s helpful to begin by assessing what stage your startup is currently in. With this information, you can then determine if your current stage aligns with the stage in which a particular funder is most likely to invest.
This can arguably be the most difficult stage to receive funding. In most cases, unless you’re a veteran entrepreneur, you won’t have much luck securing capital from angels and institutional investors this early in the game. Likewise, it can be very challenging to request monetary support from friends and family if you lack a fully fleshed-out business model.
While other idea-stage funding options exist, such as crowdfunding, we encourage you to explore the regional entrepreneurial ecosystem and to take advantage of the wealth of resources available at your fingertips. Various business assistance organizations in Northeast Ohio—including JumpStart—offer the guidance you need to strategically validate your business model before raising capital.
In the pre-seed stage, your idea is coming to life—giving you more choices and opportunities to fund your business. You can continue without the help of others by bootstrapping or you may decide to approach your social circle for funding, but these aren’t your only options.
At this point, you have more than just an idea on a napkin, so it’s possible that investors may start developing an interest. Start fine-tuning your pitch and you’ll be ready to seek capital from angels, incubators/accelerators and local grants.
Your startup will be considered a seed-stage company when you begin acquiring customers and gaining market traction. Of course, more paying customers means more validation in your market, which translates into additional interest from investors.
You’ll have even more funding options to pursue than you did during the pre-seed stage—making this both an exciting and confusing time in your fundraising lifecycle. Should you pursue angel funding? Is venture capital a better choice? What about debt? Unfortunately, there is no universal answer that can apply to every company, so you’ll need to do some due diligence of your own.
By the time you’ve reached this stage, your company is likely to have an established go-to-market strategy, a repeatable sales model and employ a powerful execution of both. As a result, your startup may be experiencing rapid growth that requires considerable capital to keep pace and grow even faster.
Similar to the seed stage, you’ll have the option to pursue angel funding, venture capital and debt capital. The main difference between seed stage and early stage is that you’ve now proven yourself—opening doors to more substantial capital in the form of Series A funding. Series A funding will provide your business the resources it needs to scale operations while continuing to grow revenue.
To learn more about the ways JumpStart provides capital to growing startups, click here.