Typically, a few of the bigger firms will lead the investment, often strategically so.During the Series A stage, a start-up’s valuation will be calculated by its proof of concept, progress made with initial seed capital, quality of executive team, market size and the risk involved.Advantages for start-ups raising Series A include the ability to scale faster with a larger financial reserve – as well as increased recognition within their industry.After proving it has a perfect product-market fit and a scalable marketing blueprint, Series B is all about building – and in this round, start-ups should be well clear of the development stage and looking to expand their market reach.Businesses looking to raise Series B capital will already have fully launched their product/service and will now be targeting a market share in their chosen sectors and looking to compete against larger, more established competitors.While the chances are that a business raising Series B will already have a significant turnover, it’s at this point that it should start to also turn a profit.Series B rounds can range anywhere between $7m and $20m – and will appear quite similar to Series A in terms of the process and what investors will be involved.However, some venture capital firms that specialise in later stage investing may be present in a Series B funding round.Sometimes considered the hardest round to raise, while Series B start-ups are considered less-risky than those at seed or Series A stage, any tendency by investors to suspend disbelief and back a business on potential is completely gone.If seed is raised on vision, and Series A on hope – then Series B is raised on pure facts and figures.A time of slow growth for the start-ups involved (Series C is where scale-ups start to grow really fast), Series B isn’t the most popular stage for investors either, as most would rather invest cheaper at Series A or with less risk at Series C.Businesses who successfully raise Series B funding will normally invest in business developmentDuring the Series B stage, a start-up’s valuation will be calculated by, its performance in comparison to that of its sector, revenue forecasts and its assets such as intellectual property.Start-ups who are at the Series C stage of funding have all but proven to venture capital firms that they’ll be a long-term success – with original backer’s shares now having increased considerably in value.As a result, Series C raises are considered a very safe bet, from an investor’s point of view.Businesses at the Series C stage will look for an even greater market share and to develop even more products and services and may also start preparing for a potential acquisition – both of itself by a larger corporate – or to buy a smaller competitor.The final stage for many start-ups before they seek an Initial Public Offer (IPO), valuation of a business at Series C is done on the basis of hard data – with this round more an exit strategy for the venture capital firm.Groups such as hedge funds, investment banks, private equity firms and big secondary market groups will all also begin to invest at this stage where companies can raise anything from single digit sums to hundreds of millions.With the unstoppable rise of the ‘armchair investor', even someone with the most ill-informed views of what constitutes a sensible investment can now back start-ups to their heart's content.Indeed, via alternative forms of raising finance such as crowdfunding, businesses can nowadays rise millions of pounds worth of investment – without giving away an inch of precious equity.So why do businesses decide to part with larger chunks of equity and go down the venture funding route?The reason for this often lies in the role of the venture capitalist – and what they can offer your business besides the initial injection of cash.A top tip to consider when sizing up potential investors,Startups.co.uk are trading styles of Marketing VF Ltd, an Appointed Representative of Resolution Compliance Limited which is authorised and regulated by the Financial Conduct Authority (FRN: 574048).
GB 208 3065 32. In the current climate, some businesses are finding it hard to raise funds at a valuation that fairly reflects their growth in a normal market, leading to significant dilution for founders and current shareholders. There’s also a glossary at the end of this post for some of the key terms used.An ASA in its simplest form is an investment for equity, but with the shares priced and issued at a later date. And what does a venture capital firm offer besides investment?A venture capital fund is an investment fund made up of contributions from wealthy individuals or companies, who give their money to a VC firm to mange their investment portfolio for them and to invest in high-risk start-ups in exchange for equity.All investors are made aware of what funds or businesses their money is being invested into, as well as the potential risks and rewards of such investments.Often when raising a fund, venture capital firms will target a certain amount or specific sector they'll invest in.Each fund will normally finance multiple different businesses – with the range of likely individual investments normally announced when the fund launches.Most start-ups who raise venture capital funding have been refused funding by traditional lenders, such as banks, because they're deemed too risky a bet.However, of those that don't fail (of which there will be many), the likelihood is that they'll experience long-term growth and provide a substantial return for investors.While venture capital firms know that not all investments within a particular fund will pay off, it's hoped that those that do prove a winner will be so successful that they'll not only offset against any losses – but also far exceed them.An important consideration for entrepreneurs, venture capital funding is absolutely no guarantee of success, and for many venture capital firms the process is akin to commercial fishing: if they cast a big enough net (invest in multiple businesses via a fund) they'll be bound to catch something.As part of the investment contract, many investors will also have additional requirements. © Seedrs Limited 2019.