How a startup raise fund?

Whether by watching on Shark Tank episodes or reading articles on the Forbes, a lot of youths are pretty fascinated about entrepreneurship these days, especially with all those startups turning into unicorns, let's dive into how startups actually get their hands on some cash:

1. Seed Round:

In this round, the startup is just getting off the ground. Founders often contribute their own funds, and they seek initial investments from friends, family and relatives. At this stage, the company's valuation is typically low, reflecting the early stage of development, the high level of risk, and the limited evidence of the product's market.

2. Angel Investor Round:

After the Seed Round, startups may raise additional funding from angel investors who are individuals with high net worth and are willing to invest their own money in early-stage companies. Venture Capital (VC) firms usually participate in this round. They provide crucial capital to help the startup further develop its product, refine or redefine its business model, and begin to establish its existence in the market. The valuation of the company at this stage is still relatively modest but may increase compared to the Seed Round if reflecting progress is made.

3. Other Rounds (Series A, B, C, etc.):

With the support of angel investors and initial success in the market, the startup may pursue larger rounds of funding from venture capital firms in subsequent Series A, B, C, and so on. These rounds enable the company to scale its operations, expand its team, invest in marketing and sales efforts, and further develop its product or service. As the startup achieves milestones and executes its growth strategy, its valuation increases with each subsequent round of funding. Typically for most of the startups in Shark Tank, these rounds of investments takes place from the Sharks.

4. Initial Public Offering (IPO):

After several rounds of funding and significant growth, the startup may reach a stage where it considers going public through an Initial Public Offering (IPO). The IPO involves offering shares of the company to the public for the first time, enabling it to raise substantial capital from public investors. The valuation of the company at the time of the IPO is determined through a combination of financial metrics, market conditions, investor demand, and the perceived growth potential of the business. After the IPO round, the compary is declared as a public company rather than a private one.