Icon Ventures
Types Of Venture Capital For Start Up Businesses
Being a new business is difficult not only when looking to gain traction in the market, but when hoping to acquire funding as well. A business is never going to grow without a requisite amount of venture capital being pumped in. Most people assume venture capital is simply the idea of throwing money at an investment and hoping it sticks. This is not how things work and is a very basic understanding of how the process unfolds. Let's take a glance at the various types of venture capital and what they represent.
Seed Financing
A new business is going to need someone to trust it and believe in its ability to grow as time goes on.
This is where a venture capitalist will come in and provide seed money. What does this type of money mean? It is generally a 'small' amount in relative terms and is provided to help the business have a foundation in place to acquire a proper loan.
With this seed financing in place, the business is able to get going in the right direction sooner rather than later along with having financial support.
In most cases, seed financing is an entry way into further financing down the road when the investor sees this as a riveting opportunity for them to go with.
Start Up Financing
This is another type of venture capital provided by venture capitalists. Start up financing is designed to help a business complete its product and/or service set up. It is going to ensure the development comes to a conclusion and the sales can start being churned out since a business is only valuable when money is coming in.
This capital is provided to not only help complete the development of products, but to ensure the launch is as desired.
It is important to note, this money does not have to be reserved for completing the development of products and/or services only. In fact, if there is enough money left over it can be saved or used for marketing purposes.
It can be a good sign if the business does not need to use all of the funds in one shot and can have more to spare. It shows an ability to make the most of what is on offer and ends up putting the business in the good books with a venture capitalist. They will deem this to be a sign of good things to come in the future as the funds are being handled appropriately.
First Stage Financing
This is when the business begins to look towards investing further into gaining traction in the market. This means the business is going to begin penning down a proper marketing campaign to let the target audience know about the new solution on offer.
These funds are used to push more product and/or services to the market as soon as possible. The venture capitalist will usually prefer to have control over the way money is being spent and how it is going to be handled in the days leading up to a launch and afterwards.
First stage financing is going to come in higher amounts compared to previous investments. However, it is critical to remember all of these financing types are linked to one another in most cases as they are going to come in stages. Therefore, if more funds were provided in another stage less funds are going to be provided in the next taking the financial situation into consideration.
The stages are in place to ensure funds are not being wasted and can be tracked easily.
These are the most important types of venture capital a new start up business should be keeping note of. Without these different types, most would assume all of the financing comes under one bubble when that is not the case at all. These are three distinct types of capital and each one is going to come at varying stages of the business and its development. As the business grows, so do the types of capital provided by venture capitalists. It is essential to be aware of this at all times prior to signing off on anything.
Being a new business is difficult not only when looking to gain traction in the market, but when hoping to acquire funding as well. A business is never going to grow without a requisite amount of venture capital being pumped in. Most people assume venture capital is simply the idea of throwing money at an investment and hoping it sticks. This is not how things work and is a very basic understanding of how the process unfolds. Let's take a glance at the various types of venture capital and what they represent.
Seed Financing
A new business is going to need someone to trust it and believe in its ability to grow as time goes on.
This is where a venture capitalist will come in and provide seed money. What does this type of money mean? It is generally a 'small' amount in relative terms and is provided to help the business have a foundation in place to acquire a proper loan.
With this seed financing in place, the business is able to get going in the right direction sooner rather than later along with having financial support.
In most cases, seed financing is an entry way into further financing down the road when the investor sees this as a riveting opportunity for them to go with.
Start Up Financing
This is another type of venture capital provided by venture capitalists. Start up financing is designed to help a business complete its product and/or service set up. It is going to ensure the development comes to a conclusion and the sales can start being churned out since a business is only valuable when money is coming in.
This capital is provided to not only help complete the development of products, but to ensure the launch is as desired.
It is important to note, this money does not have to be reserved for completing the development of products and/or services only. In fact, if there is enough money left over it can be saved or used for marketing purposes.
It can be a good sign if the business does not need to use all of the funds in one shot and can have more to spare. It shows an ability to make the most of what is on offer and ends up putting the business in the good books with a venture capitalist. They will deem this to be a sign of good things to come in the future as the funds are being handled appropriately.
First Stage Financing
This is when the business begins to look towards investing further into gaining traction in the market. This means the business is going to begin penning down a proper marketing campaign to let the target audience know about the new solution on offer.
These funds are used to push more product and/or services to the market as soon as possible. The venture capitalist will usually prefer to have control over the way money is being spent and how it is going to be handled in the days leading up to a launch and afterwards.
First stage financing is going to come in higher amounts compared to previous investments. However, it is critical to remember all of these financing types are linked to one another in most cases as they are going to come in stages. Therefore, if more funds were provided in another stage less funds are going to be provided in the next taking the financial situation into consideration.
The stages are in place to ensure funds are not being wasted and can be tracked easily.
These are the most important types of venture capital a new start up business should be keeping note of. Without these different types, most would assume all of the financing comes under one bubble when that is not the case at all. These are three distinct types of capital and each one is going to come at varying stages of the business and its development. As the business grows, so do the types of capital provided by venture capitalists. It is essential to be aware of this at all times prior to signing off on anything.