Moeney talks! Especially when it comes to startups. So it is best to look at the process of fundraising by start-ups. 
Investing in a startup has several stages in which each step should be seperately and vigilantly taken into consideration.

Stages of fundraising

 

1. Seed capital

This stage is the first source for injecting capital into the startup and is usually provided through
the personal funds of founders, friends and acquaintances. If for some reason the resources mentioned are not available,
the accelerators are in the reach of your hand, and, in return to obtaining a certain amount of stock from the start-up (usually 10 to 15 percent) they provide necessary facilities, such as:
coworking space, mentors, Business Advices, etc so as to the acceleration program also provided to that startup.

 

2. Angel round

Startups after the formation of an initial team, the development of a business model canvas, and the provision of the Minimum viable product or service
require more financial resources for the development of business, marketing,
team development and the providing physical facilities needed for commercializing their product.
At this stage, angel investors are entering into the business and they are financing the costs of a new company and in some way endangering their capital.
It is important to note that startups need to have a promising prospect to attract this capital -a very important prerequisite- to convince angel investors for fundraising.

 

3. Venture Capital

Moving from the initial stages, startups need more financial resources to grow their business, usually at this stage,
VCs inject capital into startups to continue their growth. Often, risk-taking venture companies are specialized in fundraising,
and therefore they support businesses that can guarantee their return on investment. Fundraising by VCs is done according to the various parameters of the evaluation in several stages a, b, c, … .
VCs encourage startups to use funds to advance their goals to deliver their products and services To market and find their place in the market.

 

4- Middle financing and short-term loans

At this stage, the start-up is growing, significantly improved, and has a commercial product.
The company may still not be profitable, but it certainly is a revenue generating startup with value added.
Attracted funds at this stage usually direct the startups towards the expansion of the target market and even prepare for the initial offering of shares.
Investors entering this stage are looking for a bright and profitable vision in the short term. Mid-range funding can be targeted to overtake competitors.

 

5. Initial Public Offering (IPO)

The first time a private company shares a public stock is called the “IPO”. It’s important to note that a startup does not necessarily have to do this.

Stock Shares will further expand your business more widely. Startups that are now grown and become more and more steady in their growth,
can achieve a more nominal and practical value for their stocks in stock exchanges,
enabling to have further development and to recruit more talents. It will also be used to increase the value of shares to pay off debts and to allocate more funds to R&D.

 

Startups! Please do not be mendicant!

Most startups do not count on scale-up growth when they grow and  cover firm’s fixed and variable costs, and limit themselves to the organic growth with low gradients.

One of the serious threats to this stage is the presence of other competitors with the development strategy that may take the lead in the target market and drop out the startup.

Consider that startup as a child playing with snowball who wants to push a snowball from the hillside to the top of the mountain.
The higher the snowball gets, the child can not carry it alone and needs help. On the way to the advancement of the startup, the market is becoming widespread, competitors enter the field, and the market needs are constantly changing,
so startups need to always absorb capital in order to progress. Now, among the different costs of a startup, consider these important ones:

1- Human Resources

To advance the goals of the startup, human resources are among the most important resources. They are highly skilled, hard-working, so-called talents who therefore highly paid.

2- Product development

Product development in startups is part of a technological process and often results in experimentation and error
due to the fact that the result of work is not already known,
resulting in higher costs for product development in traditional businesses.
For example, nano-technology start-ups need product development in special equipment, specialist personnel, and special workspace (such as a clean room), and this may not end a final viable product necessarily.

3- Change in business model (Pivot)

Startups may start to make fundamental changes to their business model, for example, changes in the target market,
changes in revenue flows, and changes in features that often results in redoing and starting over, which is very costly for the startup.

4. The process of product marketing

Because of the innovative nature of the products and services of the startups, and the lack of information available for the public,
cultural domination practices to eventually convince to use these services and products are often time-consuming and costly to build.
For example, privacy and security measures for online shoppings or on using Internet taxis.

 

The last but not the list, it seems necessary to talk about the Burn Rate in the startups. The amount of money that is spent in a given time period (often a one-month measurement criterion) on fixed and variable costs of a startup is the burn rate and the amount of time it takes to finish is called Run way.

We should emphasize on the subtle fact that attracting appropriate and adequate capital is not a reason for the success of a startup
and we would definitely invite you to scrutinize Top 5 Reasons Startups Fail in order to avoid them at any stage of your entrepreneurial journey to success.