A startup begins with an idea. Lending credence to this idea and making it materialize into a concrete product/service requires, inter alia, capital.

In the startup ecosystem, a startup needs to raise capital in the beginning and even at various stages of its existence. So do all startups require these funding rounds? Not necessarily. A startup that has collected its capital from the entrepreneur’s own funds, his friends and family does not to go for funding rounds. This is called the ‘bootstrapping’ method.

When the startup is granted its first funds, at its nascent stage, the capital is called as ‘seed capital’. The angel investors or some venture capital firms may provide this capital.

The startup now uses this seed capital to develop into a startup and generate revenue. Now that the startup has a concrete record of functioning, it can aim to further grow as a company and opt for another round of funding for the same. This series of raising capital, post the seed capital, is called the Series A funding round.

It is imperative to note that, the startup will be put under the scanner for its goals and growth after Series A funding round. It will be expected to generate some amount of revenue to be eligible for this round of funding. This round of funding is generally only dominated by the venture capital firms in the startup ecosystem.

Series B round of funding involves expanding the startup’s reach, and aiming to build it into a company. This also entails series of processes where the startup is to exhibit a record of generating steady profits for a period of time. This is also the time that a startup needs to strengthen its profile and build a business model. It starts to cater to the users and alter/develop its product accordingly, and needs capital for the same.

Series C round of funding by investors is essentially only to get quadruple the amount of capital invested. By this stage, the startup is (mostly) established. And with this round, it only creates some minor changes, with the intention of further ‘branching out’ as a company. The number of investors by this round also exponentially increases, with exponential increase in profits that the startup generates. Lot of companies makes mergers and acquisitions to develop the startup in this round of funding.

Takeaways:

• Seed Capital is the fund that a startup receives at the initial stage.
• Series of raising capital, post the seed capital, is called the Series A funding round.
• Series B round of funding involves expanding the startup’s reach, and aiming to build it into a company.
• Series C round of funding by investors is essentially only to get quadruple the amount of capital invested.