Startups: Understand investment steps and market terms

The startup ecosystem has its own terms. Among them, perhaps the most important are those that classify the stages of investments.

To put together the solution they present to a problem, startups need investments. Understand the steps and ask questions about other terms used in the market.

Main types of investment in startups:

Angel: is the first to push an idea. It is usually done when the company is still validating its business and involves the personal assets of those who invest in the business.

pre-seed: it is usually done in startups that are developing their MVP (minimum viable product, a kind of prototype of the product or service that will be tested in the market).

seed: this type of contribution, which translated means “seed”, is still made in the initial phase of the startup. Usually the company has already launched its product in the market and has acquired some customers.

Serie A: here the first fundraising takes place after the startup’s business model has been validated, with growth potential. Private equity and venture capital funds are now more common, and the amounts usually exceed R$ 1 million.

Serie B: Startups are more mature, with an established clientele and have proven that they have the capacity to multiply their revenue. The values ​​are in the tens of millions of dollars and the rounds are usually led by funds that have already invested in the company.

C series onwards: From now on, the money that comes in can be used for the startup to acquire other companies and prepare for a possible IPO (public offering of shares), when the funds usually realize the profits from their investments made in previous rounds.

See the meaning of other terms in the startup universe:

accelerator: is a private equity organization that invests in startups with great growth potential. In addition to financial support, it supports the development of the business, with guidance and mentoring.

bootstrapping: act of starting a company using own or client resources, instead of seeking funds from investors.

crowdfunding: crowdfunding, generally done via the internet, by individuals interested in supporting an idea. The entrepreneur presents his project, establishes the value he needs to turn it into a business and sets a date for achieving the goal.

Incubator: its role is to support companies in their early years, helping to establish the business model. Accelerators are considered an evolution of incubators.

MVP (Minimum Viable Product): prototype version used to test whether a company’s business model is viable in the market.

pivot: expression derived from English, “to pivot”, means to change a company’s strategy to avoid losses or increase profits.

private equity: modality in which an investment fund buys part of a company and becomes a partner. The objective is to improve results and increase the value of the organization, and then sell its share of the business at a higher price.

Valuation: process of estimating the value of a company in the market.

Venture Capital (VC): term used to describe venture capitalists. In general, they support startups that are already established in the market and that want to expand their operations​.