Building a startup is hard. It takes a lot of time, money and resources to get to the point where your business is generating sustainable revenue. And it takes even more time, money and resources to move to the next funding stage. That’s the reality of the startup funding cycle: it can take 10-12 years to go from seed round to IPO (although unicorns may make this look faster).
The first step is to identify your startup’s needs. This includes the initial setup costs of your business, your operating expenses and the runway you need to get to profitability. Then you can craft a detailed budget that is grounded in rigorous market research and realistic assumptions.
This initial budget is usually the basis for your pre-seed funding round. At this early stage, you can raise funds from private individuals (friends, family and fools) and from institutional investors such as angel investors and venture capitalists. If you can be picky about the people you bring on to your cap table in this stage, it can help you save one or two rounds of funding and retain more equity ownership in the company.
Another option for early-stage startups is to receive government grants or subsidies. These are non-dilutive and can be especially helpful for startups focusing on innovation, R&D, or those in specific industries or regions. They can also provide your company with a boost in credibility and validate your product’s value proposition.