Funding
As a start-up founder, it can be overwhelming to navigate through the maze of different funding options.. With questions from Entrepreneurs like “what is the best way to attract investment?” And “will my proposition live beyond being just another great business idea?” constantly looming, the path to securing the right funding is far from straightforward.
But securing the right kind of funding is critical to start-up success and turning your vision into reality. Let’s explore some of the seed funding options available in some detail and discover what might work well for your business.
What is Pre-seed Funding?:
Pre-seed funding is the initial injection of capital given to help a start-up to develop their concept into a viable business model. The amount of capital involved is often relatively small and is likely to come from the founder themselves, family, friends or even crowdfunding or angel investors.
At this stage, start-ups can have high failure rates and therefore investors focus more on the strengths and capabilities of the founding team and less on demonstrated success. Therefore, founders that show industry acumen and leadership abilities are more likely to be successful in their pitch than if an attractive opportunity is presented without a strong team to back it up.
Pre-seed funding confirms that an idea is ready to attract more significant investment. Companies that have demonstrated the importance of this type of early-stage funding include two of the earliest app-based British Banks, Monzo and Revolut; using early funding to successfully launch their banking service concepts.
What is Seed Funding?:
Like pre-seed funding, seed funding provides an early stage investment as the first official capital that a business needs to launch a minimum viable product (MVP). They can then demonstrate they can deliver value to customers in their associated market. Thisis essential in ensuring the next round of funding can be successful.
Subsequent rounds of funding are described alphabetically from A to E and continue to involve funds being acquired in exchange for equity in the business. These progressive stages of investment in startup are typically larger than the last and are designed to support scaling, product development and market expansion, aiming for profitability. Here is a breakdown of all those rounds of investment.
Series A Funding:
Once a start-up’s potential is confirmed, it continues to raise finances in the Series A round, typically from venture capitals. Described as the “crunch” round, start-ups will often face challenges in securing this next level of financing. Future product development can also be significantly impacted at this stage.
Series B Funding:
Awarded to businesses with a high potential for both profit and strong return on investment, Series B funding is typically provided by venture capitals and often by those involved in previous funding rounds. With initial proven success coupled with less risk, Series B funding opportunities are attractive to investors. The average Series B funding amount for 2023 was reported to be £33.9 million with series A averaging between £4 and £10 million.
Series B funding is typically used to launch large-scale advertising campaigns, to build brand awareness and to hire key personnel.
Series C Funding:
The goal of Series C funding is to scale a business by either expanding into new markets, developing new products, or acquiring different companies.
High risks associated with initial stages of investment are significantly reduced at this stage and as a result, attract interest from private equity firms, large financial institutions, banks and hedge funds.
This type of funding is critical for businesses to secure their market position and expand their operations.
Often at this stage, businesses will prepare for potential future exit strategies and subsequently will choose not to continue with funding rounds including D, E and beyond.
Series D Funding:
Whilst businesses seeking this type of funding have already established themselves in the marketplace, an additional injection of capital may be needed to achieve specific goals or address underperformance issues before opting for an IPO (when a private company sells its shares for the first time on a stock exchange) or acquisition.
At this stage, the business will typically have a substantial valuation with investors being a mix of venture capital firms, private equity firms, hedge funds and strategic investors.
Only a few start-ups will continue to the next funding stage.
Series E Funding:
Businesses that reach this stage often seek funds for reasons similar to those mentioned for Series D funding. Series E funding is a critical step for mature start-ups with a proven business model and significant market presence, to drive further growth and to prepare for exit opportunities.
Successful and well-known companies that have gone through this round of funding include popular holiday rentals portal, Airbnb; using the additional capital to enhance its platform and global taxi booking app Uber to focus on technology development.
Other Types of Funding:
Start-ups do not need to solely rely on series funding to confirm the validity of their value proposition. There are numerous other options to secure investment from crowdfunding and venture capitals to loans and angel investors as well as bootstrapping (when the business owner self-funds the business alongside revenue).
Start-ups can also consider government grants and other schemes e.g., Innovate UK.
Whatever path you choose to secure funding, remember this: investors are drawn to a compelling vision and a deep understanding of the landscape—whether that's economic trends, customer needs, market dynamics, or regulatory hurdles. But it doesn't stop there. Strategic thinking and resilience are just as crucial. The founders who master this delicate dance of vision, knowledge, and strategy are the ones who don't just survive—they thrive. They push boundaries, overcome obstacles, and turn their innovative ideas into successful businesses. So, gear up, stay sharp, and get ready to make your mark!
If you want to get started on your startup journey with a team that’s poised to help you make things happen, drop us a message at Evolved ideas on ......