The Art of Startup Fundraising

8Investment Rounds Explained

Securing investment for any startup tends to occur in defined stages. These investment rounds allow startup founders to seek, attract, and then negotiate the capital they need to take their company to the next stage.

If you've just launched your first startup, then some of these investment rounds can seem confusing. Understanding each one can help you better negotiate with potential investors, and let investors know that your business knowledge is sound.

More than simply understanding the terminology and what each round entails, you'll also need to know which rounds are specific to your situation, and how to navigate each one effectively. Figure 8.1 provides a good summary of what the financing lifecycle of a startup looks like.

Figure 8.1 Financing Lifecycle of a Startup

Source: European Business Angel Association.

Let's now discuss each investment round in greater detail to help you identify investors and maximize your success rate.

Friends and Family

This preliminary round of funding is usually the first port of call for an aspiring startup entrepreneur. It's here that you raise the capital you need to get your startup off the ground, and that is done by asking friends and family to invest in your business idea.

While it is often necessary to approach family and friends for initial funding, there are situations in which you may not need their ...