What are the different Startup Funding Stages?
Whether to raise funds for your startup?
How to Raise Funds for Your Startup?
How much to raise?
There are uncountable numbers of questions founders get when it comes to raising funds for their startup. There is a lot of unawareness, myths, and confusion around fundraising.
In this blog, I will walk you through different startup funding stages in as simple language as possible. So, let's go ahead –
1. Bootstrapping (a.k.a. the "Use-Your-Own-Money" Startup funding Stage)
You might have heard the word “Bootstrapped” startup. Bootstrapped means the founders are using their own money to get the company up and running. This is where most founders start. When you are in your ideation stage, trying to build MVP and get traction, it is highly likely you will have to put your own money, or you can take it from your friends and family in exchange for some equity in the company. In today’s startup era, it is difficult to raise funds just based on the Idea. Founders need to get some traction and show some validation of their idea to raise money from external investors. So, if you are a startup founder at an ideation or pre-ideation stage, make sure to plan your finances well so that you have enough money to get validation for your idea.
Looks like:
- Working nights and weekends
- Building a rough MVP on a budget
- Testing the waters with early users
Real Examples:
MailChimp bootstrapped its way to success — running for years without raising a single penny from investors.
Zeroda, a fintech giant based in India, is still bootstrapped and has never raised external funds.
Sara Blakely launched Spanx without any external funding, relying on her savings to start the company.
2. Pre-Seed: Startup funding Stage for building your product
Let’s say you know your idea has taken shape, you built an MVP or prototype, and got some market validation and customers. Now, you need money to build a product and reach more customers, and add people to your team. This startup funding stage is called Pre-seed funding or Angel funding if you are raising only from Angel investors.
Angel investors are high-net-worth individuals (HNIs) that invest their own money in individual capacity in exchange of equity, whereas Venture Captitals(VCs) are institutions that manage and invest money of their limited partners in exchange of equity in the company.
Who might invest in your startup at this stage:
- Friends, family, colleagues, Ex-bosses, College Alumni
- Angel investors
- Some early-stage VC firms
How much: $10K to $500K
Use of funds:
- Refine the product
- Bring on your first team members
- Start user acquisition
Example: Airbnb raised $20,000 from Y Combinator at this stage — just enough to keep them afloat and prove the concept.
3. Seed Funding: Startup funding stage for finding Product-Market Fit
By this point, you’ve got a live product and some early traction. Now, you need money to expand your team, invest in marketing to get more customers, get office space, add more features to your product, and get Product Market Fit, or you might have already reached PMF from the previous round and want to continue innovating or adding new features/products.
You create a business plan for the next 12-18 months and list down the expected expenses and revenue. This will give you an idea about the money that you are supposed to raise. Create a pitch and a cover letter, and start reaching out to investors.
Typical investors:
- Angel investors/ Angel Funds
- Seed-focused VC firms
Funding size: $500K to $2M
Goals now:
- Nail down your target market
- Improve the product
- Start real growth
Example: Mamaearth raised seed round of $2M in December 2016 from Fireside Ventures, Suhail Sameer, Vijay Nehra, and Shashank Shekhar
4. Series A Startup Funding stage : Scaling Your Startup
You’ve proven there’s a market. You have users, revenue, and data. Now, you need funding to scale your user, team, and product. You need to try out different marketing strategies. Hire more experienced people in the team and set up processes and automation. This startup funding stage gives also gives you sufficient amount to expand your office space.
Investors at this stage:
- VC firms with large portfolios
- Institutional investors
Round size: $2M to $15M
Why raise at this startup funding stage:
- Expand the team and hire highly specialised talent
- Try Different Marketing Strategies, trying different markets
- Expanding product offerings
- Build a stronger tech infrastructure, automations, and process optimisations
Example: Dropbox raised $6 million in their Series A from Sequoia Capital. They had traction, a solid product, and a plan to grow.
5. Series B, C, D… Start funding stages(The Growth Rounds)
It is really important as a founder to understand different Startup funding stages and use money wisely after each stage of funding, show expected growth to investors, and build a strong consumer base. After series A, if you have built a strong product market fit, hired the right people in the team, set up strong internal processes, and have a strong working culture and happy customers, then it is all about continuing the momentum and continuously innovating. You now need to hire CXOs for your startup who contribute to the growth of your startup and turn it into a giant
Investors will now include:
- Late-stage VCs
- Growth equity firms
- Strategic investors (corporates)
Funding range: $15M to hundreds of millions
Common goals:
- Try different Markets and Scale globally
- Diversify the offerings
- Acquire other startups that align with your business goals
Example: Nykaa raised $721 million across multiple funding rounds, including Series E led by TPG Growth Capital
6. IPO: Going Public
The ultimate stage of funding. Going public through an IPO means listing your share in the primary market, a dream of many entrepreneurs. You have done a great job so far. You’ve made it. Your company is big, profitable (hopefully), and ready to go public. It's time to list your company on the stock exchange. An IPO lets early investors and employees cash out — and brings in huge capital for future plans.
Why companies go public:
- Raise significant capital
- Build credibility and visibility
- Offer liquidity to early stakeholders
Example: Airbnb’s IPO in 2020 valued the company at over $100 billion. From renting air mattresses to global travel tech giant — it’s a journey powered by funding stages.
Final Thoughts
Startup funding isn’t a one-size-fits-all roadmap. Every startup has its own journey. Some founders raise several rounds. Others bootstrap all the way. What matters most is knowing:
- Where is your company right now
- What is the next thing that you want to achieve
- What resources do you need to achieve your next goal
- Are you ok diluting your company? Incoming investors- Do they only bring money or other values as well
Don’t chase funding because everyone is doing that. Raise money when you have something real to scale. And when you do, make sure you understand the game that you’re playing. Talk to your mentors and other founders to ensure you are making the right decision at every startup funding stage
Clarity. Focus. Action. That’s how startups win.
