Financing rounds

A financing round is the increase in a company's capital by investors. Interested investors invest money in a company that it needs to develop and grow. There are different types of financing rounds, each of which covers a different capital requirement. Depending on the phase of the company, a financing round of a different amount is required. The various investment phases in which investors can invest are summarized here: Investment phases.

Basically, different types of financing are possible depending on the company phase.

Which form of financing is the right one?

As soon as you have an idea as a founder, you should start thinking about financing. There are various options for start-up financing, which we have summarized for you: Start-up financing - How do I finance my start-up? First of all, however, you should clarify the most important question for you, namely whether you want to finance yourself via external capital and bring investors on board or whether you opt for the option of financing from your own funds(bootstrapping). Both have various advantages and disadvantages. If you bootstrap, for example, you don't have any external investors involved in your company and you don't have to answer to anyone. However, you also have less capital available in this case. For some start-ups, the choice therefore falls on financing through external investors, as investors can not only eliminate financial worries and provide sufficient capital for growth, but they also usually have extensive know-how and can give the founders valuable tips. You should always bear these aspects in mind. As soon as this decision has been made and you decide to bring investors on board, the financing rounds begin.

Series Seed

At the beginning of the seed phase or even in the pre-seed phase, there is only an idea for a start-up project. In this phase of founding a company, the aim is to develop an initial prototype or MVP. This requires a certain amount of capital. However, it is not yet clear in this phase whether and how successful the start-up will be, which is why it is particularly difficult to convince external investors, as the risk is still very high.

The three F's At the beginning of this phase, the capital therefore usually comes either from your own pocket or from family, friends and fools. Accelerators

Another option for early-stage financing is participation in an accelerator program. Here, selected start-ups are accompanied by an accelerator for a short phase of 3-6 months and receive start-up capital (e.g. salary payments or office space) as well as access to a large network and experienced coaches.

Incubators

Another option for financing at an early stage is to join an incubator (incubator for start-ups). Although the founders have to cede a large proportion of their shares to the incubator, they receive an "all-round carefree package" in return and are supported by the incubator from the outset with seed capital as well as in marketing, sales and day-to-day operations.

Now that the first phase of product development has been completed and a finished prototype has been created, a proof of concept needs to be developed. With this, a start-up proves that it has a functioning business model and can successfully establish itself on the market. However, in order to carry out this proof of concept, additional capital is required, which usually comes from business angelsor venture capital companies. The financing volume provided in this first round - the series seed - is usually between €50,000 and €500,000.

If you are looking for a suitable business angel or venture capital provider, it is important that you are sufficiently prepared. In addition to a convincing pitch deck, you also need a convincing elevator pitch, as business angels are usually met at pitching events where various start-ups pitch their idea and compete for the favour of investors.

In addition to financing from business angels, raising capital from an early-stage investor is also an option. Some VC companies, such as High-Tech Gründerfonds, have specialized in this area. Together with their capital, the proof of concept can then be provided.

Series A

Once a proof of concept has been successfully provided, it is now easier for the start-up in question to access further investors or to raise venture capital for the first time if this has not yet been done.

The next step is to enter the market, which requires the expansion of production, marketing and sales. This requires some external capital. Series A financing usually involves sums of between €500,000 and €5 million.

Series B

Series A financing is usually followed by a further round of financing, known as Series B financing. This is primarily intended for start-ups that have already established themselves on the market, generated initial sales and have a certain market share. If the aim is to grow the company and expand into other markets once it has successfully established itself on the market, Series B financing is required. The financing sums here are usually over €5 million, which are provided by private equity funds specifically geared towards growth capital.

Series C, D, E

Further financing rounds such as Series C, Series D or Series E financing can follow. However, this usually depends on the type of business model of the start-up and whether further capital is required for higher growth. Financing rounds at this stage usually involve an investment volume of between €10 million and €100 million.

Exit and IPO

Now that a company has successfully established itself on one or more markets, it can work towards an IPO. If a start-up decides to go public(IPO), this usually attracts the attention of a large number of new investors who, for example, only focus on investments in listed companies. In addition, an IPO can also attract a great deal of media attention to the company in question and thus increase awareness immensely. Overall, an IPO broadens the investor base and the start-up can attract new investor groups (e.g. private investors).