It’s the ultimate entrepreneurial dream – be your own boss, start your own company and make money doing what you love. Inspired by stories of Silicon Valley success, Australia’s startup scene is flourishing, with no shortage of new ventures and innovative ideas. That said, getting your big business break requires more than just a good idea – It takes careful planning, a broad network and most importantly, a healthy stream of startup funding.
With support from an investor or financial backers, you don’t have to be a millionaire to make your startup dream a reality.
Here’s a breakdown of the different stages of start-up funding so you can get your journey started:
Read more: How to Plan for Business Growth.
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Seed Round: finding angel investors
The ‘seed round’ is the preliminary round of investment for a startup in its conceptual stage. It’s speculative but can help by providing necessary investment to progress a startup.Capital at this stage is provided by individuals referred to as ‘angel investors’, ‘business angels’ or ‘seed investors’.
They help launch startups or entrepreneurs in exchange for ownership or convertible debt.
The capital can be a one-time investment, or consist of ongoing funds to carry a business through its early stages. Angel investors may consider opportunities for a startup’s initial public offering, acquisition or exit strategy.
With a high degree of uncertainty attached to startup funding, angel investors often secure ownership equity or convertible debt in exchange, but continue to provide the capital investment that startups are unlikely to attain from banks.
The seed round is best placed to identify any potential concerns with an idea. If successful, this will provide a small investment for a startup to take its first steps in producing a working prototype.
Some startups have a prototype of infrastructure in place, meaning a seed round may not be necessary.
Businesses that raise capital from a seed round can invest money to cement the type of product or service to develop, conduct research within a marketplace, identify specific demographics to target, or to hire a team prior to launch.
To raise funding in the seed round, startups can use crowdfunding, either reward-based or equity-based, where equity is provided in return for investors.
Regulation for crowdfunding can differ for startups across the globe – in Australia, crowd-sourced funding is regulated by the Australian Securities and Investments Commission (ASIC) and should be consulted before engaging with crowdfunding.