|
 Initial Funding |
|
Pre-seed
Stage |
A relatively
small amount of capital is provided to an investor or entrepreneur to
prove a specific concept for a potentially profitable business opportunity
that still has to be developed and proven. The funded work may involve product development
(as opposed to "pure" research), but it rarely involves initial
marketing. |
|
Seed
Stage |
Financing is
provided to newly formed companies for use in completing product development and in initial marketing. These companies may be in the
process of being organized or may have been in business a short time. In
either case, products have yet to be sold commercially. Generally, such
businesses have assembled key management, have prepared their initial
business
plan, and have conducted at least initial market
studies. |
|
Early
Stage
(First
Stage) |
Financing is provided to companies that have expended their
initial capital and now require funds to initiate
commercial-scale manufacturing and sales. |
|
Expansion Funding |
|
Second
Stage |
Working
capital is provided for the expansion of a company which is producing and
shipping products and which needs to support
growing accounts receivable and inventories. Although the
company clearly has made progress, it may not yet be showing a profit at
this stage. |
|
Third
Stage |
Funds
are provided for the major expansion of a company which has increasing
sales volume and which is breaking even or which has achieved initial
profitability. Funds are utilized for further plant
expansion, marketing, and working capital or for development of
an improved product, a new technology, or an expanded
product line. |
|
Bridge
Financing
(also Later Stage or Expansion Stage ) |
The firm is mature and profitable, and often still expanding. Financing is provided for a company expected to "go public" within six months to a year. Often
bridge financing is structured so that it can be repaid from the proceeds
of a public offering. Bridge financing also can involve restructuring of
major stockholder positions through secondary transactions. This is done
if there are early investors who want to reduce or liquidate their
positions. This also might be done following a management change so that
the ownership of former management (and relatives or associates) can be
purchased prior to the company's going
public. |
