The Startup Fundraising Journey Explained

Obtaining startup capital is extremely competitive. There simply aren’t enough interested investors for every great idea. As an additional challenge for those outside Silicon Valley, the dollars disproportionately gather in the direction of the tech world.

Fortunately there are innovative new ways to raise capital, among them equity crowdfunding. In an article on Forbes.com by contributor Will Schroter, the author writes that Startups can draw on a mix of funding sources.

He gives a step by step overview of the process.

1. “The idea stage”

In the beginning, Schroter writes, “Typically, startup founders first approach friends and family to raise an initial seed round. This usually occurs during the idea stage of a startup.”

He says that crowdfunding can be a smart move at this stage; it helps you grow and attract later stage venture capitalists. Also equity crowdfunding enables you to provide value to your first investors.

2. “Later stage seed funding”

“Later stage seed funding often comes from angel investors, who make their decision to invest based on a startup’s traction (sales numbers, notable press mentions, etc.), as well as an affinity toward the entrepreneur,” Schroter continues.

3. “Post seed round”

Finally, after your company is demonstrating real potential–i.e. you’re profitable and growing–you’re in a position to pitch to venture capitalists.

They’re cautious for good reason; 75% of startups fail. VCs therefore want to want to see some evidence that your company won’t be one of that 75%.

Schroter concludes by saying that startup funding is an exciting journey and “early stage companies now have more tools to raise capital than ever before.”

To read the original article in its entirety, please visit Forbes.com.