While a founder knows that his or her startup is excellent, it is difficult to convince people to invest millions in your company. Funding for startups is a slow and gradual process, and it is essential to know each stage well in advance.

Pre-seed funding or self-funding

Before even starting the business, the founder(s) must ascertain as to how much amount will they invest from their own pockets. At this stage, people also prefer to take help from family & friends as this does not require lengthy documentation and they can save on heavy interest rates, which the bank would otherwise charge. This is also called the bootstrapping stage of your business.

Seed funding

This is the very first set of money that a startup raises from an external investor. As the name suggests, this is the seed that (hopefully) helps a company grow when it is just planting itself. Usually, the amount raised from the seed funding during the process of startup funding round is used for market research and product development.

Angel investors are the most common type of investors at this stage. While this is the starting stage for many startups, it is also a ‘wrapping up’ stage, If the startup fails to utilize the first round and get in some results, it gets difficult for them to move to the second round of funding that is, Series A funding.

Series A funding

Once a startup passes through the seed stage and has some traction on their website/app (it can be in terms of users, revenue, views or whatever the set KPI is), they are ready to go for Series A round.

In this round, startups are expected to have a plan in place for the future development of the product or service they offer. These businesses are also likely to use the raised money to increase revenue.

Series B funding

Any startup that has reached the Series B has already figured out their product-market fit. All they need is assistance in expanding it.

Usually, the expansion that occurs after raising the Series B round is not limited to focusing on gaining more customers but also in building a strong team to serve the growing customer base. 

Series C funding 

At a stage when a startup is ready to acquire other businesses or develop new products or expand to new markets, it can be said that the startup is ready to make it to Series C funding.

The common trend suggests that a startup gets ready to raise Series C round when they plan to go out of their home country or to acquire like business models. (similar to the one they have)

It is also seen that Series C is the last round that most of the companies go for. However, some companies move ahead to Series D & Series E rounds too.

Series D funding

This round of startup funding is a little more complicated than the other rounds. As mentioned, most companies usually exit the funding rounds after Series C. However, some companies move to Series D. Two of the common reasons here are:

Positive side- The startup has discovered new opportunity for expansion before going public or has found more opportunities to acquire businesses and increase the value of the business. 

Negative side- On the other hand, another reason a startup might want to raise Series D can be because they have failed to hit the expectations laid out in the previous rounds. 

Series E funding

A very few companies make it to Series E round for the startup funding. Startups looking to raise funds at this point have usually failed to meet their expectations from the previous funds raised. Another reason can be that they still need some external help before going public.