What does Series F funding mean

Seed to Exit - How does the startup financing cycle work?

Securing the financing of a startup is one of the greatest challenges for founders. Depending on the development phase of a startup, there are new financing options.

Many founders ask themselves how they can finance their startup and, above all, how they can create enough financial means to develop and grow. It is clear that each path is individual and offers different options. The fundamental question arises as to whether external capital is desired or whether the focus is on "self-financing". Often it remains inevitable for startups to fall back on investors in order to be able to grow quickly and sustainably. In general, it can be said that different company phases also enable different types of financing.

The first funding

Every beginning is difficult! It is the same when it comes to initial funding within the seed phase. In most cases, financial support for the first prototype, a minimal viable product, is sought in the seed phase. The problem is that a startup usually doesn't have much to show at this stage, apart from the mere idea of ​​the project, a pitch deck, or at best a business plan. It is all the more difficult to convince investors. That is why it often happens that the founders have to finance themselves in the seed phase. There are incubators or accelerator programs that provide support through their infrastructure and network. Development loans or support from your own friends and family can also help.

The proof of concept

If a first prototype exists, the so-called Proof of Concept (PoC) follows as the next step. The PoC is proof that the product has been accepted on the market and that the business idea works. The product is z. B. tried and evaluated on a small "test market". This step is of particular relevance for financing by venture capital investors.

The Series A

Depending on the financing plan, venture capital plays a major role in the start-up financing cycle series A. A venture capital company (VC) usually specializes in one branch and invests in young start-ups in this area. The investments are mostly made through funds. VCs often deliberately leave the majority stake in the company with the founders and also provide support with specialist expertise. The negotiations between startup and VC can be very complicated and good preparation on the part of the startup is of great importance. This financing round already involves a large sum (often in the six-digit range) that is invested for further growth.

The series B

A startup in this phase has already positioned itself in the market and generated sales and built up a market share. The next step is to implement the business model in new markets. This round of financing usually involves a large volume. The Leipzig startup Wundercurves from the SpinLab, for example, received 1 million in this financing round. Existing investors can enable further financing, or investors who specialize in growth capital can be brought on board. One then speaks of old and new investors.

Series C, D, E follow

Due to the past financing rounds, there are already clear KPIs and the company can already show successfully completed financing rounds. A company valuation is available. With good preparation and processing of the data, a new round of financing with existing investors, but also with potential new ones, can be concluded within a few months. Whether this phase of the financing rounds is necessary differs from start-up to start-up.

At the end of the exit?

An exit is the term used to describe the departure of the founders or investors from the company. The aim is to achieve the highest possible profit. The exit is particularly interesting for those actors who do not intend to invest both time and other resources in the company in the long term. It makes sense to sell the shares that show a high increase in value.

Going public

It can also be a “perfect” exit for a startup to go public. Many founders would like their company to be publicly traded one day. Because then it is possible for the financiers and shareholders to collect the required capital, which is required for expansion and further growth.

When going public, it is important to have good timing and even better preparation.