The startup world
has investment stages which are often used to classify the maturity of companies:
3. Series A
4. Series B, C, D etc
This is what they mean
ImpactBase focuses in the pre-seed stage of a startup. Pre-seed startups usually are not much more than an idea with maybe a website, a plan and some market testing. Some may already be generating revenue, but most are not. At the pre-seed stage, the business is usually building the fundamental building blocks of the business like refining its product/service, working out who its customers are and how to reach them.
The aim of the pre-seed stage of a startup is to develop a minimum viable product/service (MVP) and then test product-market fit. If you can do that, and the result is compelling, you can secure seed investment. Building a MVP and conducting product-market fit are intertwined and discussed here.
Everyone has a different definition of the difference between seed and pre-seed stage. ImpactBase’s is pretty simple. We believe a startup is ready for seed investment when it has a MVP and has proven product-market fit. If you have these two things in place and they are compelling, then you are more investible because you are a safer bet than if you only had one of these.
The seed stage is therefore about securing investment and then moving fast to attract a customer base and refine the MVP into its next iteration. At this stage you will really start feeling like a CEO as you need to hire, delegate, manage and be on top of core business skills like your income statements. You will also be developing, possibly for the first time, your core CEO skill of getting a team focused on executing a compelling vision. But at this stage, you are still doing a lot of work in the business itself, whether coding, selling or building.
Not many startups get to a Series A round. At this stage you’re pitching to institutional investors and venture capital (VC) firms to secure investment so you can scale the business into the national or international juggernaut you know it can be. You know a startup is at this stage when it is generating exciting revenue, has refined the MVP into a proven model and that demand for the product/service is outpacing your ability to serve it.
This stage is where things get exciting in terms of expansion as you are starting to realise your vision. At this stage you are also transitioning into a more mature and experienced team where you are doing much less of the coding, selling or building, and much more of the team building, culture reinforcement, direction setting and coaching – you will be moving from a ‘doer’ to a capability builder.
Series B, C, D etc
Investors will fund additional funding rounds if there is a clear case that rapid expansion is required AND you can prove there is market demand for it. Traditional and stable businesses grow using their own revenue to fund their expansion, Series B+ rounds are designed to turbo-charge expansion without resorting to costly loans whose repayments would likely cripple the business at some future point.
Why would you need to turbo-charge your expansion? Usually because you want to achieve market dominance before a strong competitor can do the same, or demand for your product/service is so great that not expanding fast is a clear missed opportunity.
An initial public offering (IPO) is when you sell a big chunk of your company to thousands of every-day investors by listing on a stock exchange. A successful IPO provides a substantial cash injection for the business, and allows the founders to sell their equity in the company easily and profitably.