The steps to Equity Investment in Early Stage and Startup

Equity - Dictionary Series

Equity – Dictionary Series

All companies need to start with an idea. To realize the dream of a successful company and leading a small startup attempt to that level you must need funding. This will not only grow confidence in you but also help expand your company. However, the traditional funding is done with the help of bank loans or personal loans. These loans often have high interest rate which can take a toll on the long run. In such situation equity investment comes very handy and reliable. Initially equity purchasing appear as creation of debt, but at a later stage it can be transformed as company shares. Let us discuss the steps of equity investment.

Pre-seed step

Pre-seed funding is the primary stage in terms of equity investment. It is usually done at the initial stage of your startup business. At this stage you might not have a large number of employees working for you, or as less as you and the other partners. Usually commercial banks do not show interest in providing loans at such stage. Alternatively, incubators may also help funding at this point. Their help may come in the form of support services.

Seed step

At this step friendly investors along with initial-stage VCs may invest in the startup and provide aid to enhance the development. With money the startup starts to grow at this level. What you should do is allocating the resources in such a manner that boosts the company even more. More marketing policies can be taken.

Valuation

Using pre-money and post-money valuation you need to determine the actual value of the company. This will focus on gross margin and flow of cash.

Capitalization Table

A capitalization table needs to be assembled at this point after the valuation.

The above mentioned steps are towards equity investment in the early stage of Startup.

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