You’re new to business but you’ve been told you’ve got a great idea and it needs money… Suddenly people are talking about seed money, venture capital, ABC series funding and IPOs.
Here’s IIJ’s short and simple definition of investment stages. It includes approximate levels of investment split between private equity, venture capitalists and business angels. Be warned, the same stages of financing are also known as series funding – A, B and C. This is explained further down.
Seed capital: Financing provided to research, assess and develop an initial concept. Usually this is put up by the entrepreneur and their own sources of financing (loans, family investment) but it can also include business angels and venture capitalists (VC).
Start-up capital: Financing for product development and marketing. Again sometimes from the entrepreneur’s sources or business angels and VCs.
Later-stage venture capital: Financing provided to expand a company or increase investment. The company may or may not be profitable. Venture capital and private equity.
Growth investment capital: Usually from private equity companies to provide growth capital to more mature companies. VC and private equity.
Rescue/turn-around financing: Investment in an existing business which has gone through problems. VC and private equity.
Replacement capital: Secondary injections of cash. VC and private equity.
Buyout, from private to public, from public to private: Management buyouts, public to private, private to public. VC and private equity.
Then there is the funding known as series funding:
Series A round: Normally this level of funding is much higher than the original participants in the business can continue to support. It is also normally after some proven success – a developed product, a market success, new contracts. This is up to £5m.
Series B and C rounds: These are normally in stages of growth in a company anything from new markets or acquisitions. Depending on the size of the company or industry the sums can be anywhere from £5-£50m.