Funding stages
MediaINDEX LLC
1
Stage one is idea generation.
The creator of a startup is the very generator of ideas, without whom it is impossible to realize what has been conceived. It is he who is the full and sole owner of 100% of the company. Sooner or later, however, any business needs to expand its infrastructure, add an additional assortment of products, and develop competition, which requires regular monitoring of the market situation, expansion of the workforce, and attraction of new promotional tools.
Therefore, the creator of an idea should, at the outset, think about who he can trust and who is capable of becoming a reliable co-founder of the future business.
2
Stage two - attracting co-founders and initial funding
IPO projects require large investments, while at the same time being characterized by high profitability. This means one thing - it will not be possible to realize the idea on your own.
However, even here there are risks, because any investment in something new can go bad, the project itself will be unprofitable, and the creator of the startup will be dependent on all those who can raise the idea from its knees and make it presentable to future business angels and investors.
There are few alternatives here - either turn to lending institutions or create a team ready to work as co-founders. In the latter case, the question will arise - what share of the business can they claim? You can bargain with yourself for a long time, but the most ideal option - to divide the business in half in order to avoid any risks upfront.
Having determined the circle of co-founders, then it is necessary to create a company, register it with the tax authorities, prescribe the share of all participants in the Charter, not forgetting to leave 20% for the staff, competently distribute all the roles.
3
Third stage - attracting potential investors
So, the company is open, the work is in full swing, the business requires infrastructure expansion, heavy investment in advertising, and serious financial support, but the stage of venture capital investment and IPO is still a long way off!
What alternatives do the company founder and co-founders have?
On the one hand, business incubators can help, which are able to invest in the project for a reasonable 5-10% of the total share of shares and provide competent specialists with extensive experience in implementing similar ideas in practice.
On the other hand, you can turn to private investors or business angels, but their appetite will be much higher, but the amount of funding will also increase.
In practice, this means one thing - the business is slowly getting out of control, but still requires additional funding, so then the venture capital stage begins!
4
Stage four - investment from venture capital funds
The key risk is further loss of control over the business, because its estimated value will increase again, and the appetite of the venture investor will be about a third of the total share of the company!
The further scenario can develop in different ways. The worst case scenario is the lack of interest on the part of venture capitalists, which will inevitably lead to the need to exit the market.
The most promising scenarios:

  • The company may be absorbed by a larger market player;
  • If there is sufficient capitalization, the company may go IPO, which is a worthy finale.
5
The last stage - IPO
A properly implemented IPO project is a real “gold mine”.
Obviously, a startup creator cannot do without quality support - a powerful team is needed. For example, such reputable companies as Goldman Sachs and Morgan Stanley are engaged in the promotion of projects at the IPO stage, receiving approximately 7% of all funds raised, the volume of which in practice is astonishing.

And this is not surprising, because the IPO stage is an opportunity to get financial support for a project that has already gained popularity from millions of investors from all over the world, selling their own shares on stock markets.

At the same time, there is no need to have a proof of profitability of the business.
Based on the results of the IPO, each of the project participants can decide whether to continue building up their own capital or to place their shares for sale, receiving a profit that is many times higher than the initial investment.

Thus, we argue that startups have the necessary potential to go public with minimal risks, but the principle of fairness and mutual respect should be kept in mind.
These are the key ingredients for success, with which an IPO for startups becomes not a cherished dream, but an obvious reality!
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