Raising capital for your business is about much more than money. We use “the innovation funding model” that has its key premise that the original idea and the product developed meets the value of the capital that’s being raised This is usually at the point where your product or service is at the commercial proof stage.
When you first start off, you’re investing your capital, including your time. Your investment is not worth much as you’re doing research and development and matching your product to the market needs. Often you start with funds from family and friends and what you can borrow personally and perhaps government grants. Then you move towards production and packaging.
At that point, we consider you a start-up. You are ready to go to market and sell your idea, and people are prepared to buy it.
This is the commercial proof stage and it’s time for your next round of capital raising capital. If you want, say, $5 million, the company will be valued at some multiple of that (but this is not the time to be greedy). You and your original shareholders will still own the majority of shares (at least 51%).
After that, you move into the strategic planning positioning and marketing, where your investment is still at risk, but you can access venture capital funds. And you are moving towards the stage where you’re going to be profitable, pay back your debt and maybe even harvest some of the fruits of your labour.