Do you know what stage your business is in right now?  Are you just starting with a great idea that you think will revolutionize the world?  Are you operating a current small business at optimal levels and ready to jump into a national expansion market?  Or are you ready to take on an acquisition and merge technologies and resources to form a giant in your industry?

 

Your business stage plays a large part in how much money you can secure from venture capitalists, and from whom.  Many VC firms are very strict about providing only seed money to potentially big businesses.  Others are only in the market to fund companies preparing to go public with an IPO. 

 

Take a close look at your business stage.  Then compare your positioning with those VC firms you have narrowed down to be potential funding sources.  Find out which ones invest in companies in your stage of development.  Here are the most common:

 

Early Stage

 

An early stage company is one that is not yet ready to position its product or service on the market.  A company in this stage may need seed capital or start-up capital in amounts ranging from $25,000 to $250,000.

 

• Seed Capital – If your business is still in the idea stage and you have yet to perform feasibility studies, market research, and product development, you probably are in need of seed money in order to continue getting your business idea into fruition.

 

• Start-up Capital – A business that has performed studies and research into their chosen market and is ready to take their product into the public is prepared to receive start-up capital from venture capitalists.  Start-up money can help with the initial marketing push, helping to distribute your product in the market.

 

Expansion

 

Expansion capital is for businesses already in or ready to start production today.  The amounts that venture capitalists usually invest in expansion companies range from $500,000 to $5 million.  There are usually four stages to expansion capital:

 

• 1^st Stage – 1^st stage funding is used towards full-scale production of a product.

 

• 2^nd Stage – Usually for companies in production and generating revenue, but not yet making a profit, second stage capital helps to grow receivables, inventory, etc.

 

• 3^rd Stage – Third stage, or “mezzanine” financing, helps businesses perform major expansion and perhaps even develop and introduce new products.

 

• 4^th Stage – Also known as “Bridge Financing,” companies in this stage are in need of capital to help smooth the way to a potential IPO within about six to twelve months.

 

Acquisition/Buyout

 

A company in this stage has advanced operations and is prepared to acquire another competing company as a subsidiary, or expand into new markets and products with the purchase of an existing company.  Monies for this type of capital can range from $3 million up to $20 million.

 

Be prepared to show your potential VC that you understand which stage your business is in and how you propose to penetrate or expand into new markets and reach the next stage.  Find a VC that funds that stage.  Then solidify your business plan so that you can convince your potential venture capital firm that they should invest in you.

 

 

 

 

 

 

Tags: angel investor, angel investors, find capital, Find funding, start up capital, start up funding, vc funding, venture capital, venture capital stages, Venture Capitalist

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