The following is a video of me giving this presentation: https://youtu.be/61QFpaATR9c
What are the phases, the risks, the rewards, and the odds?
What do I need to know as a software developer when it comes to startups?
5. (2) Seed Funding Stages
● Customer Traction
● Equity in exchange for cash
● Product Launch
● Valuation of $100k to $6m
6. (3) Series A Funding
● Targeting future growth
● Shares are offered for capital
● * Average time is 22 months to get here
* https://www.embroker.com/blog/startup-statistics
7. (4) Series B Funding
● Proven Scalability
● Increase market share
● Operational Teams formed
● * Average time from A to B is 24 months
* https://www.embroker.com/blog/startup-statistics
8. (5) Series C Funding
● Global expansion
● New Markets
● Acquisition
● * Average time from B to C is 27 months
* https://www.embroker.com/blog/startup-statistics
9. (6) Series D Funding
● New opportunities
● Subpar performance
12. Know what you are getting into
* https://www.embroker.com/blog/startup-statistics
● Savings
● Insurance
● In Writing
Editor's Notes
A startup is a company that's in the initial stages of development. It's started by one or more entrepreneurs to address a specific demand for a product or service. Startups are high-cost and low-revenue businesses, which leads them to seek outside investors for capital until they can make a profit.
Startup funds go to people or groups of people to raise money for their new business, which allows the company to grow. When investors help to fund a startup, they do so hoping that they can receive a larger amount of money from the business in the long term. Depending on how much someone has invested into a company, they may also be able to make business decisions that affect how the company runs.
This is the research phase of beginning a startup. During the pre-seed stage, make sure to answer the following questions:
Is your idea viable?
Has your idea been done before?
How costly is your venture?
What kind of business model will you use?
How will you get started?
In many situations, much of the business funding during this phase either comes from you or friends and family. The total value of a startup in this stage can range anywhere from $10,000 to $100,000.
At this point, your idea is an actual business with some customer traction. Entrepreneurs in this phase provide company equity in return for larger amounts of cash provided by investors. Costs covered by seed funding include:
Product launch
Product marketing
New employees
Market research on product-market-fit
Startups valued anywhere from $100,000 million to $6 million are eligible for this phase of fund raising.
The Series A funding stage marks the beginning of venture capitalist investment, and shares of the company are offered in exchange for capital.
At this point, you can begin to set yourself up for future business growth. This includes the following:
Optimizing your business
Offsetting financial losses or shortfalls
Further developing your product or service
Creating a scalable blueprint for growth
Startups in this stage have dedicated user bases and steady streams of revenue. At this point, you've proven you can scale your idea. Investors can now help you:
Employ advanced market reach activities
Increase market share
Form operational teams such as business development and marketing
Series C funding is for a company well on its growth path and often interested in expanding globally. It may be easier to find investors at this stage, as they trust the startup to succeed. Funds at this phase are used to do the following:
Build new products
Reach new markets
Acquire underperforming startups in the same industry
There are usually two reasons a startup goes past the Series C funding round. They are:
New opportunities: A potentially lucrative opportunity appears that requires the company to act before the Initial Public Offering (IPO).
Subpar performance: The startup misses the goals set during the Series C round of funding. It then raises more funds in the Series D round to address the issues.
There is no limit to how many funding rounds a startup can go through. If a company has more advanced revenue goals, it may complete as many fundraising series as necessary.
These loans are designed for fairly mature businesses worth at least $100 million. A mezzanine loan blends debt and equity for lenders, while bridge loans are short-term financing. They close the financial gap between this phase and the IPO. The funds might be used to buyout the management at another company or acquire a competitor. Loans typically last six to 12 months and are paid back with proceeds from the IPO.
An IPO is the pinnacle of startup success. It occurs when shares of the company are offered up for public purchase for the first time. The IPO is used to generate funds for further growth or allowing the startup owners to cash out their remaining shares for personal income.
Important events occur in preparation to issue an IPO. They are:
Formation of a public offering team comprised of SEC experts, lawyers, accountants and underwriters
Compilation of the startup's information such as financials and anticipated future operations
Preparation of an audit of the company's financial statements
Completion of the governmental IPO requirements, which include filing the startup prospectus with the SEC and formalizing the offering date
