Funding FAQ questions
What are the main sources of funding for startups?
When a startup is moving from an idea to execution stage a startup can tap into the network of angel investors, family offices, and high net worth individuals from their personal network.
Equity funding is the most common source of funding for startups. Startups give shares of their companies at a predetermined value in exchange of capital. Several venture capital funds exist to meet the capital and strategic needs of a startup at different stages of its growth.
Debt financing has also gained popularity in India. A company can raise venture debt from institutions once its raised venture capital. Private equity and hedge funds also enter the mix at the growth stage of a company to provide capital. Increasingly, companies, VCs and individuals have launched accelerator and incubation programmes that provide seed money to startups. Strategic and corporate veggies funds also invest into startups at early and growth stages
What is A, B & C series funding & how does it work?
Traditionally a startup raises a series A round when it has discovered an addressable market and somewhat proven that they can execute the idea in that market. It is often the stage when a company begins to develop its monetisation model and long-term growth plan. It is also the first round that a startup may get an institutional buy-in. In India early stage VCs include the likes of Sequoia Capital, Matrix Partners India, Lightspeed, and Elevation Capital.
A Series B round is raised by a startup to take its growth to the next level internally as well as to create product awareness. The round is typically used by startups to acquire premium talent and prepare internally to meet the growing demand of its product and fine-tune its product market fit. Series C onwards, the company raises funds to capture a bigger pie of the market, aggressively grow its user base. Strategic investors and growth stage funds like SoftBank Corp, Tiger Global Management and Temasek may come in at this stage.
