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Venture Financing, Venture Financing, Venture Financing, Venture Financing, Venture Financing, Venture Financing, Venture Financing, Venture Financing, Venture Financing
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Venture Financing Stages (Phases of Venture Capital Funding)
Pre-seed
Stage: A relatively small amount of capital is
provided to an inventor or entrepreneur to prove a
specific concept for a potentially profitable business
opportunity that still has to be developed. The funded
work may involve product development (as opposed to
"pure" research), but it rarely involves initial
marketing.
Seed Stage:
Financing is provided to newly formed companies for use
in completing product development and in initial
marketing. These companies may be in the process of
being organized or may have been in business a short
time. In either case, products have yet to be sold
commercially. Generally, such businesses have assembled
key management, have prepared their initial business
plan, and have conducted at least initial market
studies.
Early
Stage (First Stage): Financing is provided to
companies that have expended their initial capital and
now require funds to initiate commercial-scale
manufacturing and sales.
Second
Stage: Working capital is provided for the expansion
of a company which is producing and shipping products
and which needs to support growing accounts receivable
and inventories. Although the company clearly has made
progress, it may not yet be showing a profit at this
stage.
Third
Stage: Funds are provided for the major expansion of
a company which has increasing sales volume and which
has achieved initial profitability. Funds are utilized
for further plant expansion, marketing, and working
capital or for development of an improved product, a new
technology, or an expanded product line.
Bridge
Financing (also Later Stage or Expansion Stage ):
The firm is mature and profitable, and often still
expanding. Financing is provided for a company expected
to "go public" within six months to a year. Often bridge
financing is structured so that it can be repaid from
the proceeds of a public offering. It also can involve
restructuring of major stockholder positions through
secondary transactions. This is done if there are early
investors who want to reduce or liquidate their
positions. This also might be done following a
management change so that the ownership of former
management (and relatives or associates) can be
purchased prior to the company's going public.
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