MaRS Library Stages of company development: Angel, seed and venture capital investors
The stage of your company development affects the type of investor that is appropriate for your business
The type and source of investor funding available for your business depends on your company’s stage of development. Investors often take a specialized approach, focusing on one key phase of the lifecycle of a growing company. Some venture capital investors (VC investors) use a diversified approach, providing initial investment to companies at different stages in the financing lifecycle (for example, they may invest 25% in startups, 50% in growth-stage companies and 25% in later-stage companies).
Source: The Company Financing Lifecycle – Primaxis Technology Ventures
Venture capital investors
Most venture capital investors (VC investors) will continue to provide funding in later rounds for their portfolio companies that achieve business milestones, while angel investors may choose not to fund beyond the early stages.
VC investors seek to end their funding in three to seven years as per their investment strategy. Keep in mind that an early-stage investment may take seven to ten years to mature, while a later-stage investment many only take a few years. Therefore, investors will target companies that can create returns to match their target timeline.
A business has four basic stages of development:
At each stage of development, a company has different available resources, as well as varying needs, investor expectations and levels of risk. As part of a financing strategy or roadmap, entrepreneurs should develop a set of technology and business milestones, determine the size of target investment rounds, and, based on their company’s stage of development, identify appropriate investors to approach for funding.
Thinking of raising money? We’ve created a free online course to help you get investment-ready. Check out Introduction to Investment Readiness and learn useful tips, tactics and strategies to prepare for your seed fundraising round.
Canada’s Venture Capital & Private Equity Association. Retrieved April 19, 2009, from www.cvca.ca.
National Venture Capital Association. Retrieved April 19, 2009, from www.nvca.org/def.html.
National Angel Organization. Retrieved April 19, 2009, from www.angelinvestor.ca.
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- How to prepare for your business presentation with investors.
- Marketing strategy for startup success: Identifying and understanding your target customer and market segments.
- Financing your tech startup: Government funding programs across Canada.
- Incorporating in Ontario: A guide to incorporation for startups.