You’ve probably heard of a bunch of finance-related buzzwords being tossed around; “Seed” rounds of funding, “Angel” Investors, “IPO’s,” what do they mean, and why should we care?
Tech is a capital-intensive industry- it needs $$ to fund its projects. This money comes from VC’s and Angel investors. Angel investors and venture captial firms provide financial capital to early-stage, high-potential, high risk, growth startup companies. The venture capital funds makes money by owning equity in the companies they invests in, The typical venture capital investment occurs after the seed funding round as growth funding round (also referred to as Series A round) in the interest of generating a return through an eventual realization event, such as an IPO or trade sale of the company
So, what is a seed? Typically, a seed round helps the company scale to a few employees past the founders and to build and launch an early product. As the product starts to get more and more users, a company will then raise a series A. Typically, the range of seed funding is $250K-$2 million. Angels, SuperAngels, and early stage VCs all invest in seed rounds.
Series A funding occurs when a company has typically figured out its product/userbase and needs capital to scale distribution, scale geographically or across verticals, and/or figure out a business model. Generally, Series A funding can be in the range of $2-$15 million, and money is invested by traditional venture funds such as Sequoia, Accel, Greylock etc.
Series B funding is *key.* In this round, companies look to scale the business itself, making large rounds of hires. Ranging from $10-100 million, series B provides an opportunity for us (the Talener Group) to get our foot in the door and help staff rapidly expanding companies.
What is an IPO and why does a company do it? The definition of “Initial Public Offering” or IPO is the first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the capital to expand, but can also be done by large privately owned companies looking to become publicly traded. In an IPO, the issuer obtains the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), the best offering price and the time to bring it to market. Also referred to as a “public offering.” most IPOs are of companies going through a transitory growth period, which are subject to additional uncertainty regarding their future values.
Definition of ‘Direct Public Offering or “DPO” is when a company that raises capital by marketing its shares directly to its own customers, employees, suppliers, distributors and friends in the community. DPOs are an alternative to underwritten public offerings by securities broker-dealer firms where a company’s shares are sold to the broker’s customers and prospects.
What can we learn about staffing and Finance? Follow finance news- keep an eye out for IPO’s, series B funding rounds. Source companies that are about to or recently have gone through funding or IPOs. FOLLOW BLOGS- Techcrunch is my favorite tech blog
Crunchbase is the best news source for funding updates – http://www.crunchbase.com/funding-rounds?page=1&q=seed. Google Finance is another great way to follow companies after they go public (Technology list is over 900 tech companies) – https://www.google.com/finance?catid=66529330