Raising Capital for Startup Companies Stages Two and Three

The second stage is typically known as “growing the business” stage. During this stage, a company could privately issue its securities to people known as sophisticated and accredited investors. If done properly, a business can avoid the significant filing requirements of the Securities and Exchange Commission. This can be a great source of significant funds for the company.

The founders may also look to venture capitalists. These are professional investors who will look at a company and potentially invest very significant funds. However, in this market venture capitalists will usually require a large customer base and sustainable revenue. They will also ask for a very clear exit strategy. A company may also look to commercial lenders for significant loans such as an SBA loan, which is a great source of funding.

The final stage is typically known as the sale or acquisition stage. In this stage, a company may opt to offer its shares in a public fashion rather than a private manner. It’s a very complicated process known as an initial public offering (IPO). This process is expensive and time consuming and the company needs to evaluate whether or not this is a good option at that time. If it’s not, a company may opt to merge with, be sold to or acquire another company that is in the same space. This can be a very viable option for the long term.