We regularly get questions from entrepreneur’s seeking funding about the process, stages and jargon they read and hear in the market. Here is a quick table that will help explain “what is venture capital” and how the funding process works. Hope it’s helpful!

SEED ROUND
—————————————————————————————————————————————-

1. BUSINESS DEVELOPMENT STAGE:
Company has identified a market, created a convincing business plan and assembled the essential leadership team

USE OF PROCEEDS:
Build the core solution and secure initial customers to validate

SOURCES:
Angel Investors, Venture Accelerators, Early Stage VC’s (limited)

SERIES “A”
—————————————————————————————————————————————-

BUSINESS DEVELOPMENT STAGE:
Solution is proven with real customers; market demand can be demonstrated; team ready for broader rollout

USE OF PROCEEDS:
Fund initial go-to-market costs and next round of product development

SOURCES:
VC’s

SERIES “B”
—————————————————————————————————————————————-

BUSINESS DEVELOPMENT STAGE:
Solution adoption is strong; company can’t meet demand due to lack of resources; market reputation is established

USE OF PROCEEDS:
Expansion into new geographies or additional market segments/channels; Bringing in talent to scale the business

SOURCES:
VC’s

GROWTH EQUITY ROUND(S)
—————————————————————————————————————————————-

BUSINESS DEVELOPMENT STAGE:
Company is a success; time to pursue additional new markets and solutions; founder may be seeking some liquidity

USE OF PROCEEDS:
Company expansion

SOURCES:
VC’s, Growth Equity Funds

CONVERTIBLE NOTES/VENTURE DEBT
—————————————————————————————————————————————-

BUSINESS DEVELOPMENT STAGE:
Similar to Seed Round, but Company seeks to minimize dilution by offering debt to be converted at discount in next financing round

Similar to Seed Round; Company needs additional funds to get to point where additional equity can be raised; fill unexpected gaps or give time to get to higher valuation level

USE OF PROCEEDS:
Similar to Seed Round

SOURCES:
Angel Investors, Venture Accelerators, Venture Capital Lenders, Early Stage VC’s (limited)