Funding Stages

It's important to take time to learn the funding stages of a start-up. This will help you understand the different types of funding available, and what you should be looking for at each stage of your start-up's evolution.

This shows the different stages of a start-up, and the funding you should be looking at. Series B, C can go all the way to series F for example and go all the way up to a billion dollars in external investment. Private equity players come in around here - these are large investors that traditionally invested in banks. As a last stage, you are fully established, and can look into strategic expansion of doing a takeover etc. Even larger investment amounts ($\geq$ 50 Million) are available at this stage. The book to use as refernece here is Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist by Brad Feld and Jason Mendelson. This is considered the bible on entrepreneurial finance and venture investing.

Start-up Evolution

Here is a real example of an ideation timeline from Dr. Abasi Ene-Obong from 54gene:

• 2018: Tried raising funds for a lab but wasn't successful so launched a lab-as-a-service website and outsourced tests to a European company. People could order tests. Back-end to outsource lab work.
  • Start small niche, build experience and gain traction; this shows that you are investable and capable. Then, you should grow rapidly.
  • Traction/ ability to execute is what gives investors, employees, and the market trust in the company (it's a startup's currency)
• Late 2018: Asked myself, if I was well resourced, what would I build? Applied to YC with original concept for what is now 54gene
  • What would you build if you were well resourced?
  • Don't underestimate the power of networks
• Jan 2019: Got into YC. However, original concept was too larger to execute or communicate effectively at that early stage. Struggled to strip down to MVP
  • Networks are a key asset to reach VC’s. Leverage other’s trust by getting into networks like Y-Combinator, 500 start-ups, Endeavour etc.
  • Boil your idea down to an MVP and get it to work first. Do not overcomplicate. Simplify what you are trying to do. Try messaging to a community and see how it is received. Also use data and pivot to the pilot that works. Show traction
• March 2019: MVP developed. Story and messaging simplified. Seed fundraising successful
  • Story telling is one of the most important tools needed to build a high growth company

As an update, after raising $45m in two years, 54gene is shutting down (opens in a new tab).

As a note, also be aware of falling into vanity metrics - will what you're doing give you new contracts/customers. Will it add value to the company? Will it positively drive you towards your goal? If not, maybe you need to re-assess.

Exits

Quitting is not dishonorable. Quitting when you believe you can still succeed is. Sell Before You Need To, Or When Bored. Empty Your Mind When Negotiating. Never forget what your goal is: to get rich. So if you can make a great sale on something you’ve built, do it. It’s better to sell from a position of strength than wait until you need the cash:

"Try to sell before you have to. You’re an entrepreneur. Your companies are not your ‘babies,’ they are tools for acquiring wealth. Try to sell them before they peak. Buyers require what is called ‘blue sky’ (further growth) to get excited and offer a great price." ~ Felix Dennis

Resources:

• Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist, Brad Feld and Jason Mendelson