When is the right time to consider venture capital or risk capital for your business? Initially, each contractor must first see if they have exhausted all other options. As a general rule, a company would have little equity by considering private investors. There are, however, multiple sources of equity, including Friends & Family, Business Angels, VC. strategic/corporate investors, private equity firms or the capital of The Entrepreneur.
For those looking for a capital of 500,000 euros, look for VC. For small investments, entrepreneurs should look for a Business Angel or Debt Capital. An understanding of the different types of funding steps is therefore helpful
Pre-financing is necessary financing before physically building the business. This fund is typically used to develop a good business plan that can impress potential investors.
Start-up financing is necessary for financing to start building the business
Some companies may be able to skip this phase of financing, but seed capital is usually the capital required to get the basics of a start-up. Generally, at the planting stage, a business is not yet ready to open and this financing is generally used to rent offices, real estate, equipment necessary for the production of the product or service of the company.
Start-up funding is less often invested by VC and does not necessarily constitute significant funding. Start-up funding can range from € 100,000 to € 500,000. It has rarely exceeded 1 million euros. The start-up capital can also come from a Business Angel, Friends and Family or from the entrepreneur’s own funds. Only 15% to 25% of VCs invest in start-up funds.
Early-stage financing is usually where VC is purchased. A company is usually ready to trade but requires additional capital for the soil.
Later, funding is also known as the stage of expansion/growth for companies that are doing well and looking to grow.
There are many ways for entrepreneurs to raise start-up capital to get started
These conventional methods include raising capital from a commercial lender, merchant bank or angel investor who is willing to invest seed money in the business. Other ingenious entrepreneurs raise seed money by raising debt, equity and funds from their friends and family. Funding by funding is generally associated with seed funding, ie Series A or Series B funding, as above. In most cases, VC will not invest less than 1 million euros in a business.
Understand this and you will be well off and taken seriously.