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- If your company is still working on getting its first customer, it is in what I call the prototyping stage. At this point, a startup is working on a prototype that turns its product idea into a simple, inexpensive version of the product and is trying to match that up with customers. At this stage, your startup should be seeking capital from its founders or possibly grants from local government agencies or university business-plan competitions.
- Customer base. Once your startup has its first customer, it will want to find more of them. How will you pay for the engineers, sales people, and customer service professionals you need to find and keep more customers? Consider starting with friends and family or so-called angel investors. And if you are able to raise this money, you may also tap the best form of capital of all: operating profits that flow from the gap between the price you charge and your costs to deliver the product or financing from your suppliers in the form of delaying the time that they need you to pay them.
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Expansion. Typically a company must reach $100 million in sales to go public. If you reach, say, $50 million or $60 million in sales and are breaking even after having penetrated your home country–you could be in a position to reach that IPO sales threshold by going global. To do that, you will likely need to raise tens of millions of dollars from a venture capital firm.
Let’s take a look at three of these sources of capital and what it takes to…