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Startups grow through funding rounds

Many entrepreneurs in California attempt to use investment capital in an effort to scale up their companies. Typically, a startup company will go through multiple funding rounds to meet its capital needs. In exchange for funding, investors will receive an equity stake in the business. It can take anywhere from three to nine months to complete a funding round, and later rounds generally take longer to complete because of increased due diligence.

During the funding process, business owners will need to organize company data and research potential investors. From there, an entrepreneur will create a pitch deck and execute that pitch at investor meetings. If there is interest in doing a deal, a preliminary offer will be made pending the due diligence process. When an investor is satisfied with what he or she has seen, money will be transferred to the company through a wire transfer.

The type of investor that a company seeks will depend on where they are on the startup journey. At first, companies may be limited to seeking funds from friends, family or other informal sources. Angel investors may stay involved during the seed round as well as during the Series A round. Venture capitalists are generally involved in the Series B and C rounds, and by that point, an entrepreneur may be preparing to exit the business.

Startup companies that are looking to grow could benefit from strategic partnerships with angel investors or venture capitalists. These investors may help a company to scale quickly and become a large presence in its industry. Scaling a business quickly may allow both founders and investors to make a timely and profitable exit from the company. An attorney may be able to review funding deals or be of assistance during the due diligence process.

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