Startup Basic FAQ

What are the most common sources of startup funding?

When a firm moves from the concept stage to the implementation stage, it may tap into their personal network of angel investors, family offices, and high net worth people.

Equity finance is the most popular kind of startup funding. Startups swap money for shares of their company at a fixed price. Several venture capital funds exist to satisfy a startup’s finance and strategic requirements at various phases of development.

Debt finance is also becoming more prevalent in India. Once a firm has obtained venture capital, it may raise venture loans from institutions. Private equity and hedge funds also join the mix to offer cash throughout a company’s development stage. Companies, venture capitalists, and individuals are increasingly launching accelerator and incubation programs that give seed funding to entrepreneurs. Strategic and corporate vegetable funds also make investments in startups in the early and development phases.

What are A, B, and C series financing and how do they work?

Traditionally, a firm gets a series A financing after identifying an addressable market and demonstrating that they can execute the concept in that market. It is often the stage at which a firm starts to create its revenue model and long-term growth strategy. It is also the first round in which a business may get institutional funding. Early stage venture capital firms in India include Sequoia Capital, Matrix Partners India, Lightspeed, and Elevation Capital.

A firm will raise a Series B financing to take its internal development to the next level as well as to build product awareness. Startups often utilise the round to hire top personnel, prepare internally to fulfil the rising demand for their product, and fine-tune their product market fit. From Series C onwards, the firm obtains cash to expand its market share and aggressively build its user base. At this time, strategic investors and growth stage funds such as SoftBank Corp, Tiger Global Management, and Temasek may enter the picture.

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