Different Types Of Startup Financing For Nigerian Entrepreneurs

Almost consistently, we hear reports of new companies in Africa raise funds. Yet, what do the diverse sorts of financing rounds mean? All things considered, a financing round is whenever cash is raised from at least one financial investors for a business. They're given a letter, for example, A Round, B Round, C Round, and so forth in light of the fact that each round takes after another. The letter recognizes which number of rounds they're on.

Here, I want us to take a closer look at the types of rounds and what they mean.

Series A - Round Financing

Contributing at this stage is typically viewed as high hazard in light of the fact that the organization will most likely still be at the startup arrange with a great deal to prove.

Angel investors might be intrigued, however financial speculators may likewise invest. Angel investors, for the most part, invest their own cash and are frequently viewed as high net worth people.

VCs and other institutional financial investors have a tendency to invest other peoples’ money, along these lines, they generally just put resources into organizations with a demonstrated reputation to reduce their risk.

Series B - Financing

Series B round is the second round of financing by private value speculators and VCs. By this stage, the organization will most likely have a higher valuation than before. The risk will be lower than before as the business will have a track record – so the cost to invest will be higher. Investors will expect to see signs of growth and development at this stage in income, users and product/service success

Series C - Round

Series C round is required when an organization is prepared for fast growth/development. The organization will usually: have become a proven success in its market, needs to influence acquisitions of investors, increase market share and scale up or develop new products or services.

Venture Capital

This kind of situation is not quite the same as an Angel in that it is an association of financial investors. Usually, this sort of speculator isn't as inspired by the early stages of a startup and likes to see some returns before they get included.

They jump at the chance to make deals where they know they will get a return so they can be turned off by too much risk. Be that as it may, they are more likely to invest a larger sum of money, yet regularly require ownership and to be placed in a decision-making position.

Seed/Angel Funding
Seed round usually happens when the company is at the initial idea stage, or once the founder has a prototype/proof of concept, as well as some kind of sign that there’s a demand for what could be offered.

In the meantime, an angel round frequently happens when a company is only just launching, if not previously. Odds are that it will require an investment to help the business since it likely won't produce a sufficiently major income to cover all the everyday running expenses.

Now and again a seed round and an angel round isn't two separate rounds, they can be a cross breed of the two. In spite of the name, both seed and angel investment rounds usually include a large proportion of funding from friends and family.

It can also include money from angel investors who are focused on early-stage companies.

References

Damilola Faustino - Startup Funds For Nigerian Entrepreneurs!

Naira Metrics - Funding rounds and what they mean!

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Techawk - Venture Capitalists: Good or Bad?!