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Investment rounds

Launching - Stages - Exit

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Introduction

Investment rounds can be likened to stations, where the investment round is the station where entrepreneurs seek investments to utilize the funds in starting the project, development, growth, or expansion.


Launching the Investment Round

Before launching your investment round, it is important to determine your objectives in how you will utilize the investors' funds. For example, will you use them to develop your products, increase marketing to raise your revenues, expand into new regions, or introduce new services and products? Or do you need funding to overcome growth constraints? The timing of the round is also crucial. How is the current economic situation? What is the state of your organization? Are you and your team prepared to take on the obligations and tasks that will arise during and after the investment round? Investors expect you to effectively deploy the funds to achieve the desired results.

Before launching your first investment round, you need to ensure the following:


  1. Administrative, legal, and financial readiness of your company.
  2. Verify the accuracy of the company's financial statements.
  3. Understand the process and required documentation, especially the terms and conditions.
  4. Conduct a financial evaluation of the company.


Stages of Investment Rounds

There is no specific rule for the appropriate time or duration of the rounds. However, generally, an investment round takes about 6 months from start to closure. Investment rounds are typically launched every two years, depending on the size and objectives of the previous round, which can take from one and a half to two years to execute.

There is no fixed rule for the needs of startups in each stage. We will explore the general situation of the company in each stage, its goal for obtaining investment, and the targeted investors. However, these requirements may vary from one project to another and from one organization to another.

Stages of Investment Rounds:

Startups go through investment rounds according to the following sequence:

  • Pre-Seed Stage:

This is one of the early stages of startup funding, but it is not considered an official investment round.

Company status: A small team of 2 to 4 individuals, focusing on market research and developing an initial Minimum Viable Product (MVP) to validate the idea.

  • Seed Stage:

The first official funding stage. Investments at this stage are usually small due to the high level of risk, but successful projects can achieve significant returns.

Company status: Working on achieving product-market fit, completing the final product, and selling products or services to real customers. Sales are slow and low, and most processes are manual. The team grows in this stage, and company departments begin to form.

  • Series A Stage:

Stages A, B, C, and subsequent rounds before the bridge/pre-public stages.

Company status: At this stage, the company has proven its concept and successfully utilized seed funding. However, its revenues are minimal or close to zero. Investors at this stage usually focus on unique ideas and entrepreneurial leaders.

  • Series B Stage:

The startup has become a stable company, and the level of investment risk has decreased due to its market share and stable customer base.

  • Series C Stage and Beyond:

The company has expanded, has steady revenues, and seeks continuous development and improvement. It becomes easier to attract investors.


Exit Strategies

Entrepreneurs can continue to launch investment rounds as needed, or they can exit. Both decisions have different reasons, and it should be noted that sometimes exit is a goal for both investors and founders. There are two main exit strategies:

  • Mergers or acquisitions: This involves merging two similar-sized companies to form a new company or acquiring the company by a larger company, making it a subsidiary.
  • Initial Public Offering (IPO): This involves listing the company on the stock market and offering shares to the public, enabling the company to gain substantial liquidity. There are certain conditions that the company must meet to be listed on either the secondary market or the main market.



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