Stages of financing
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The first stage is the generation of an idea.
The creator of a startup is the very idea generator, without which the implementation of the plan is impossible. He is the rightful and sole owner of 100% of the company. However, sooner or later, any business needs to expand its infrastructure, the appearance of an additional assortment, becomes overgrown with competition, which requires regular monitoring of the market situation, expanding the staff of employees, and attracting new promotion tools. Therefore, the creator of the idea should at first think about who he can trust and who is able to become a reliable co-founder of the future business.
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The second stage is to attract co–founders and initial financing.
IPO projects require large investments, while at the same time being characterized by high profitability. This means one thing – you will not be able to implement the idea yourself. However, there are risks here, because any investment in something new can burn out, the project itself will turn out to be unprofitable, and the creator of the startup will be dependent on all those who can raise the idea from their knees and bring it to a presentable appearance for future business angels and investors. There are few alternatives here – either contact credit institutions, or create a team ready to work as co-founders. In the latter case, the question arises – what share of the business can they claim? You can bargain with yourself for a long time, but the most ideal option is to divide the business in half in order to avoid any risks upfront. Having decided on the circle of co-founders, then it is necessary to create a company, register it with the tax authorities, register the share of all participants in the Charter, not forgetting to leave 20% for the staff, correctly distribute
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The third stage is to attract potential investors.
So, the company is open, work is in full swing, the business requires infrastructure expansion, powerful investments in advertising, and serious financial support, but it is still very far from the stage of venture investments and IPO! What are the alternatives for the company's founder and co-founders? On the one hand, business incubators can come to the rescue, capable of investing the project for a reasonable 5-10% of the total share of shares and providing 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 appetites will be significantly higher, but the amount of financing will also increase. In practice, this means one thing – the business is slowly getting out of control, but it still requires additional financing, so then the stage of venture investments begins!
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Stage four – investments from venture capital funds.
The key risk is further loss of control over the business, because its estimated value will rise again, and the appetite of the venture investor will amount to about a third of the total share of the company! The further scenario may develop in different ways. The worst option is a lack of interest from venture investors, which will inevitably lead to the need to leave the market. The most promising scenarios: - The company may be absorbed by a larger market player; - If there is sufficient capitalization, the company can enter an IPO, which is a worthy finale.
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The last stage is the IPO launch.
A well-implemented IPO project is a real "gold mine". Obviously, the creator of a startup can no longer do without high–quality support - a powerful team is needed. For example, reputable companies such as Goldman Sachs and Morgan Stanley are engaged in promoting projects at the IPO stage, receiving about 7% of all funds raised, the volumes of which are amazing in practice.
And this is not surprising, because the IPO stage is possible to get financial support for a project that has already gained popularity from millions of investors from around the world by selling their own shares on stock markets.
At the same time, there is no longer a need for an evidence base for business profitability. According to the results of the IPO, each of the project participants can decide whether to continue to increase their own capital or place their shares for sale, making a profit several times higher than the initial investment.
Thus, we argue that startups have the necessary potential to enter an IPO with minimal risks, however
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