What is the funding cycle of a startup?

In today's article, from Intelectium We summarize the various stages that form a startup's funding cycle. When an entrepreneur founds a company, he must take into account the business idea, the team and the market, among other aspects, but it is also very important to think about the funding needed to make that project develop, grow and scale.1. Pre-seed phaseWhen a project is launched, entrepreneurs dedicate their initial phase to shaping the idea and obtaining initial funding that allows them to dedicate themselves full time to the project. These first rounds of funding usually begin, with the round of FFF's (Family, Fools and Friends), rounds financed by family, friends or even through the savings of the founders. In these investment rounds, money is generally invested in the development of the product or service, in the business structure and in market research, among others. As soon as enough money is obtained for the main needs, entrepreneurs can access other rounds of financing. In short, we refer to a time when most companies do not have a product or business model. It is a stage where the foundations are laid and the startup's roadmap begins to be formulated.2. Seed phaseThe second stage is known as seed capital. This phase aims to develop the product to launch it on the market and validate it with the first users. Therefore, the startup has already defined a product, a business project and a team. This phase focuses mainly on product development and the relationship with the target audience.3. Early stageOnce the service or product has been validated and some customers have been obtained (initial traction), the objective is to scale up to the next phase in order to expand the workforce, gain a foothold in the market, among others. In this phase, it is common for companies to launch rounds of financing in series A and B, in the first with an amount of around one and five million euros and series B between six and ten million euros.4. Growth stage or growth stageThis stage, as its name suggests, is a stage of growth. It includes series C rounds and subsequent rounds. Companies that are at this stage are in a mature phase: they have a fully cohesive team, have an established business model, have obtained benefits and need to compete, among others. In this phase, the company experiences exponential growth. Since they need a larger investment size, operations are usually led by investment banks or private equity companies.5. Exit stageIt is the last stage of the cycle for the development of a startup. When the company already has a certain history and has managed to increase its valuation, the company usually ends up going public (although this is rare in Europe), merging with another company or being acquired by a larger company. When startups seek their successive rounds of investment, an important part of their planning is to be clear about the company's strategies or potential successes. Therefore, even if it is the last phase of their cycle, it is something that you can start working on from the beginning. Finally, we want to emphasize that not all startups complete this life cycle 100%. Many of the startups are left in the first seed or early stage phases that we have mentioned, because they realize that they do not have the expected traction or because they cannot find funds to commit to the project. For this reason, it is also very common for entrepreneurs to have created more than one company in their career, or that once the cycle with their company is over, they create a new one.And you, what stage or phase are you in the startup's growth cycle?Did you find today's article interesting? Do you want to know more information about entrepreneurship? Click hither to keep up to date with all the news.