Funding a startup happens through different stages. That’s why it helps to think of startup funding as a process. And it’s crucial to know what makes up the different stages of startup funding, from seed to series C, to be better prepared. It’s tied to how we face each. Yet it also serves to know when is the right time to go ahead with each funding stage.
Fundraising for female startups and female entrepreneurs can be seen as our main focus and area of interest. Of course, we have tailored this article to fit female startup fundraising: from seed funding to series C.
Seed Funding for Female Entrepreneurs
As we know, fundraising is usually harder for women than it is for men. In 2017, only 2.8% of capital went to teams led by women, which was considered an all-time high!
But don’t let the numbers discourage you. We’re putting useful information together on this website to help you prepare as professionally and integrally as possible. More than just a definition from seed funding to Series C, we’ll also discuss a bit about what fundraising is like for startups and why bootstrapping is crucial to small businesses.
Let’s start with a definition of seed capital to cover early-stage funding right away. Once we’ve covered female startup fundraising: from seed funding to Series C, we’ll analyze a bit of female entrepreneurship and bootstrapping in particular.
Raising Seed Capital
When anyone speaks of seed capital, imagine money to get a company started. It’s inevitable as you try to get funds.
Looking for seed capital is the earliest of all stages. Whether the money comes from your own pocket, friends and family around, crowdfunding, loans, or other sources, seed funds usually don’t involve much money.
Unless you’re spending your own savings, be clear about terms. Put those on paper. Clarify how and why people are investing in your idea. Doing so helps define this for yourself, and the exercise applies to friends and family, as much as any public or private sources of funding. It’s worth remembering this at all times of your new company’s stage, for that matter.
All in all, for seed funding, the company is still developing a product. And you’re trying to fundraise enough to launch a product and a chance at some traction.
Getting into a Female Startup Accelerator Program
Seed accelerators and incubators provide seed funding and are handy in providing valuable startup information, as well as training, mentoring, creating growth opportunities, and brainstorming with knowledgeable people in the industry. In Singapore, Startup SG Accelerator provides non-financial and funding support to these partners (seed accelerators and incubators), which further helps to nurture high potential startups.
These programs are likely scenarios in terms of fundraising for female startups, as they typically need to cover a specific quota for female companies somehow. Female startup incubators and accelerator programs can be very competitive, however, and difficult to access. Also funding amounts vary per program as much as the required timeframes. Startups will need to be invested in the program to make their business idea thrive during the early funding stages. It’ll take many business hours and documents, including those from early investors, to get into an accelerator program.
Singapore-based early stage VC fund and startup accelerator, Accelerating Asia, has 40% venture capital investment into female-led enterprise. Accelerating Asia is also investing in female-only founding teams, who are coming forward to set up their funds and become angel investors.
More and more diverse funding teams will be able to evaluate the startups better and will be more equipped to understand the challenges faced by them.
It is not necessarily the strap around much booting, but the first way to go about business finances is termed bootstrapping. The term bootstrapping means a stage in which business founders use their money for a company. A critical aspect of this is dispensing of the need for investors.
As the sole person making decisions about a company, earnings will mostly depend on customer relations and private financial efforts to get an entire startup up and running. It can be a lot. And there’s no problem in bootstrapping to start a business and seeking funding during other funding stages or rounds. This is stage is commonly called as pre-seed stage of funding.
A Description of Angel Investor Funds
A relatively new company that succeeds in this early stage funding round can successfully deliver a more detailed pitch. And the amount of money it’s looking for is usually a lot higher.
The title to this round comes from the usual kind of investors that back it. And those are called angels. Angel investors are high net worth individuals who use their own money to invest in a company. They typically look for a 25% return on investment. Angel investors are a form of equity financing and have an equity stake in the company they have invested in.
Pros of Angel Investors:
- Less risky than debt financing
- In the event of a business failure, the invested capital need not be paid back
- Have a better understanding of the business
Cons of Angel Investors:
- Loss of complete control as they are equity partners
- In the event if the business is sold, Angel Investors will share profits, unlike in the case of debt financing.
A Quick Definition of Series A
Series A happens when a company has a bit of a track record. It’s the official first round of venture capital financing and larger than seed funding. It is an important milestone for any startup. To acquire Series A funding, the companies need to demonstrate a Minimum viable product and not just a dream business idea. Less than 10% of the companies are successful in raising Series A funding.
Venture capital firms (also called VCs or VC firms) invest in a company against its equity. The startup needs to be able to offer preferred stock.
Series A funding helps in kickstart the startups, support in product development, team building, and execute their go-to strategy.
As per the first quarter of 2019, there were more than 300 Series A investments deals were closed in Singapore, amounting to S$886.1mn.
Ways to get Series A funding is to join an Accelerator, network and nuture your relationship with influential investors, angel investors and VCs from venture capital firms.
Series B Explained
Moving on to a Series B round of funding means stepping up to the next level. Whether the company is scaling, increasing market share, or outliving competitors, at this point, companies have a more significant user base and a solid and proven track record.
In 2019, Series B funding grew 33% to S$12.5Bn across more than 80deals. 93.2% of total capital deployed went to digital startups.
Access to smart financing is essential to support the development of deeptech startups based in Singapore. We will continue to work with partners such as MAS to catalyse more smart monies into startups in deeptech domains.– Edwin Chow, ESG’s assistant chief executive for innovation and enterprise.
What’s Series C in Funding?
A series C round of financing means quite some success for a company. The company is already looking at creating new products, expanding into international markets, and even acquiring other companies or have to support public offering.
Other types of investors can come in here. And those can include traditional banking institutions, investment banks, hedge funds, and more.
After discussing various types of funding round for Startup its important to understand what fundraising is like for female startups.
What Fundraising Entails
Accessing capital is one of the hardest parts of what’s already a highly competitive process. All startups which make it beyond a great idea and into funding go through with this.
To raise funds, founders need to network a lot. And it’s excellent for all team members to be doing their share of it. That means staying updated on everything that’s going on in the chosen market. And it includes looking and knowing the target audience by heart, being knowledgeable in terms of stocks and company values, revenues…and more. Also it is equally imperative to join an accelerator and network with influential investors. Get hands-on feedback by partnering with a company from the same industry. Conduct in-depth research on available government grants. Singapore StartupSG supports the entire startup ecosystem. Read more details on StartupSG programmes.
When savvy enough to uphold a conversation on the state of matters, and especially on the precise route the company sees and wants for themselves, it’s time to start pitching the company as an investment project.
Pitch your company to different VC firms who are looking for the next big idea in which to invest. Bear in mind that the different Venture Capital firms have diverse kinds of interests and requirements. All typically coincide in wanting to see well-considered business plans, a great product, and a fantastic team behind the company.
How fundraising best suits your company is a very valid question to be asking yourself at some point. Beyond begging for funds here and there, the idea is to locate the best investor for your business needs. Network wisely. Spend time seeking potential investors who invest in your business area. Get one or several investors who are known for giving amounts like the one your startup needs. For that, you’ll need to have outlined business goals, several budgets, and a great pitch. Therefore, we urge a female entrepreneur seeking funding to go through these steps deligently.
Spare yourself from running out of money when you need to keep a business going. We wish you the best with all of that!