Finance - Phases of development

13 important questions on Finance - Phases of development

Where does the extent of funding depends on?

  • Nature of technology
  • Market of the venture

Describe the pre-seed phase (main goal, source funding, budget)

  • Developing preliminary product ideas
  • Avoid investment and use bootstrap financing (FFF)
  • 10.000 euro

Why are only a few professional sources of capital interested in the pre-seed phase?

  • High risk (too time-consuming with low gains)
  • Low sums of money
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What do entrepreneurs in the pre-seed phase to limit their funding requirements?

Avoid investments by
  • Hire, lend or rent equipment
  • Use existing resources

What is the definition of bootstrap financing?

Entrepreneurs finance their operations using
  • Personal savings
  • Mortgages (hypotheken)
  • Loans from family and friends
(family, friends, fools (FFF))

Describe the seed phase (main goal, budget, source funding)

  • Develop the product
  • 100.000 euro
  • Business angels

What are business angels?

Wealthy experienced entrepreneurs who invest in business start-ups in exchange for equity (aandelen) in the new venture

Why does the added value of a business angel goes beyond finance?

Support the new business by
  • Experience
  • Expertise
  • Business network
  • Positive influence on venture capitalist investments

Describe the start-up phase (main goal, budget, costs, source of finance)

  • Start the business
  • 1.000.000
  • Start-up costs: accomodation, equipment, daily costs (salaries, electricity)
  • Business angels + informal investors

What are formal investors?

Wealthy experienced entrepreneurs who invest in business start-ups in exchange for equity in the new venture. Motive is personal (financial) gain

Describe the expansion phase (main goal, budget, source of finance)

  • Growth of the business
  • > 10.000.000
  • Venture capitalists

What are venture capitalists?

Suppliers of temporary equity who often require some equity or management involvement. They only invest if they see a viable exit strategy (sell shares)

Describe the consolidation phase (main goal, source of finance)

  • Sustain growth
  • Organic growth, acquisition, merger, sale of the business, IPO

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