Venture Financing

Venture Investing

Venture Financing Stages

Stages of Entrepreneurial Firm Development and Venture Capital Funding


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Venture Financing: Key Documents




Initial Funding

Pre-seed Stage

A relatively small amount of capital is provided to an inventor or entrepreneur to prove a specific concept for a potentially profitable business opportunity that still has to be developed and proven. The funded work may involve product development (as opposed to "pure" research), but it rarely involves initial marketing.

Seed Stage

Financing is provided to newly formed companies for use in completing product development and in initial marketing. These companies may be in the process of being organized or may have been in business a short time. In either case, products have yet to be sold commercially. Generally, such businesses have assembled key management, have prepared their initial business plan, and have conducted at least initial market studies.

Early Stage 

(First Stage)

Financing is provided to companies that have expended their initial capital and now require funds to initiate commercial-scale manufacturing and sales.

Growth & Expansion Funding

Second Stage

Working capital is provided for the expansion of a company which is producing and shipping products and which needs to support growing accounts receivable and inventories. Although the company clearly has made progress, it may not yet be showing a profit at this stage.

Third Stage

Funds are provided for the major expansion of a company which has increasing sales volume and which is breaking even or which has achieved initial profitability. Funds are utilized for further plant expansion, marketing, and working capital or for development of an improved product, a new technology, or an expanded product line.

Bridge Financing

(also Later Stage or Expansion Stage )

The firm is mature and profitable, and often still expanding. Financing is provided for a company expected to "go public" within six months to a year. Often bridge financing is structured so that it can be repaid from the proceeds of a public offering. Bridge financing also can involve restructuring of major stockholder positions through secondary transactions. This is done if there are early investors who want to reduce or liquidate their positions. This also might be done following a management change so that the ownership of former management (and relatives or associates) can be purchased prior to the company's going public.

Source: Blue Rock Capital,  partially adapted