Page 39 - Nine Yards Magazine 2021/2022 - Old Mutual Corporate

funding taking the lead
The most obvious reasons why such loan applications are turned down are because the business does not have:
A proven track record over a long observable period
Security or collateral
Reputable debtors
Proven sales cycles Demonstrable cash inflows
Seed funding and angel investors
When a founder has an idea that they want to bring to market but hasn’t yet proven that a market exists for their product or service, they will need capital to develop it and test the market.
Initial funding for this is usually obtained in seed rounds consisting of smaller amounts raised from family and friends. This is informally called the Friends, Family and Fools round, as they are the early believers who stand to lose the most when an entrepreneur doesn’t yet have a product or customers.
Once there’s proof of concept or a market opportunity has been identified, the next round will involve angel investors. They are generally experienced business owners and investors with a high net worth who can contribute larger amounts.
FUNDING ROUNDS
Series A
A Series A round follows once a business has identified a market and gained some traction in the form of customers and a defined and tested revenue model. Investors are likely to be venture capitalists looking for companies that have a sound strategy for turning their idea into a successful, profitable business.
Series B and C
Funding obtained during Series B rounds is intended to grow the business and meet demand, possibly by expanding its technology or team. Series C funding is used to scale by moving into new territories and new markets, or by buying another company.
High-growth startups thrive on scale, and funding obtained in these rounds is earmarked for growth capital. They typically participate in funding rounds when they are four to nine years old and in the medium- to long-term cycle of the startup. At this point, a business may be bought by a much bigger organisation or start to prepare for an initial public offering on a securities exchange, such as the Johannesburg Stock Exchange or Nasdaq.
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