While going to any Startup-Session or Startup-Forum, you must have heard word “funding” which simply refers to amount of money you receive from any rich guy to run your startup or in most simple words-Money.
But some time, it may happen that some techy-guy comes to you and start showing-off by using some techy-words such as angel-funding, crowd-funding, VC-funding, series A,B,C funding etc. He may even disparage you by asking your startup’s funding stage, then in that case, you need to be discreet. Hence, it’s important for you to get acquainted with those terms. Read the following article from Bevy to learn about the same.
Crowdfunding is an amazing and newly adopted method of funding which nor require you to spare any equity or neither oblige you to give any salary. It is some reward which you can give to the person who contributes to your campaign because he liked you or your product, cause, service, technology etc.
It’s something you generate from family, friends, crowdfunding agencies, accelerators and/or B-Plan competitions.
You can go for this kind of funding if you are in MVP (Minimum Viable Product Stage) building or in idea-validation stage.
Once you got your MVP approved in terms of market and not in terms of your ideology/theory, then you can go for seed-funding. You get this funding from angel-investor. Angel-Investor, Angel-Funder or Seed-Investor is simply one person who invests. He is investing because he is an affluent individual who wants to provide capital in exchange of convertible debt or ownership equity.
Angel funding is for improving acquisition of customer and to build market-demand only.
The term seed suggests that this is a very early investment to your business. Uber, Whatsapp, Ola, Flipkart etc. have started from angel-funding.
Once you got through market, proved your product efficiency and build a good customer-base and you need more money to scale-up your business aggressively, then you can go for series-funding which is also called VC funding or Venture capital fund.
VC funds are used to create more customer engagement and sometime, founders use it to finalize the product/service which they want to introduce with clear business-model in the market.
Let’s see them in bit details:
- Series A – The first form of financial which you receive is from venture-capital firm is called as Series A funding. This is given based on your MVP, progress with seed-money, team-quality (not quantity), market segmentation and competitor-risk.
- Series B – It is second financial round and more than Series A funding. When you have already received Series A funding and you promise your Investor to reach certain goal and you practically show goal-achievement through business-statistics, then it forms ground for Series B funding. Series B funding is all about business-viability and business-visibility. It is also known as a venture round.
- Series C- Its additional funding or follow-up funding after Series B. This amount is greater than Series B investment from VCs. You only receive this funding if you have break-even your business through the money you got in Series B. It is last stage in funding round after which company goes for IPO(Initial Public Offering).