What and how venture capital financing in startup world?

Tinuku ~ Understandable if you say the startup world is a lot of money. For example, new digital companies in Indonesia are getting a fantastic amount of money where young people are building their dreams and afterwards like getting rain money from the sky.

Tinuku What and how venture capital financing in startup world

Not yet last year Go-Jek reportedly get funding 1.2 billion US dollars, Tokopedia in April 2016 get 147 million US dollars, Amartha a startup fintech in the field of peer to peer lending get 5 million US dollars.

Sources of funds also vary. The latest investment in Go-jek from the consortium is led by Tencent as one of China's Internet giants, while Tokopedia from Japanese Softbank company and Amartha funding is headed by Mandiri Capital.

All the news about venture funding is also confusing. For example, Amartha receives Serie A funding from Mandiri Capital, Tokopedia is said to be in the E Series stage, while Go-jek is referred to as private equity funding.

Venture capital funding is a funding company by venture capital and funds invested for a company in the growth stage. Venture capital will be rewarded when the company undergoes an acquisition or an initial public offering (IPO).

If you look at the simplest that the terms of the series in the funding refer to the stages, whether funding in the initial or subsequent stages, such as Series A must be earlier than Series E and so on. Now you have to know those stages.

Founder funding

Romantic imagination about startup is a group of young people initially have a certain product or service idea. They were hanging out in the cheap apartment and suddenly had a brilliant idea. Then they try to realize the idea.

This is the initial stage. They will use the resources they have, perhaps saving the remaining pocket money or perhaps from selling a property of theirs, then start funding the development of the embryo of a pioneering business.

3F Funding

Furthermore, these founders realized that they could no longer live in cheap homes without refrigerators. They need more money to develop dreams. At this stage the founder of startup began to look for sources of funds. But who wants to believe while the product just is not there.

This is the first stage of funding that relies on a network of founders. Stage 3F is family, friends or fools. The initial external funding source comes from parents, siblings, cousins, uncles, grandparents, old friends or anyone who turns out to have more money and is quite "stupid" to invest in an unclear business.

Seed investment

At the seed investment stage you start talking about money more seriously. This is the stage of investment that gets the attention of the investors. Usually at this stage appears figure called "Angel Investor" is an individual or a group of people who dare to take risks and provide funds to a startup.

It is important to understand that seed investment takes the analogy of plant seeds. Investment at this stage is to foster startup growth for the future, not to buy a luxury car or buy a home.

This seed funding should be done for at least one thing from a few things:
  • Stabilization of the product (realizing the idea becomes real).
  • Know the market (research on markets, competitors and business strategies).
  • Know targets (the demographics of service users).
  • Team building (recruiting employees).

You need to know that the steps in the seed investment stage is not standard because every startup has a different concept. Not all startups require investment at this stage.

Series A

For startups that do not invest in seed investment, the Series A funding is the first investment stage. This is the first time a group of young people with big dreams meet "hordes of sharks" are investors who will tear their dreams apart.

Somewhere along the way a startup must live reality. But if the previous stages have been achieved the founders should be able to deal with this stage better.

Funding from Series A is generally used to optimize product reach to market, extending product reach to new markets and leveling to the next stage. Can also build new targets or new products.

Series A is extending the life of the under-funded startup. It may be something beyond the power of the founders that there should be a fresh injection of funds and as long as investors still see the potential and the better chance you should welcome them.

Series B

Series B funding usually comes when the startup is ready. The product has been formed clearly, may have started a promotion or even already have users who want to pay. But if you already have income then why should there be Series B?

You should know that you may still need funds to build a bigger team, perhaps also a new office, develop international market coverage. Even startup also needs to acquire other startup.

A startup acquired another company? It is common to acquire other companies by utilizing funds from Series B. Acquisitions are made to solidify the business by buying other companies to build human and technological resources.

Many factors may come out of control and business is a hard world. You have to compete fiercely with other startup or even with an established company. If a business has to do tariff war to compete, then looking for Series C, Series D and beyond is a good move for you to do.