Stages of Funding

Early Stage Funding: A stage where a company has typically completed its "seed stage" of growth. It has a founding or core senior management team in place, has proven its concept or completed its beta test, has minimal revenues, and no positive earnings or cash flows.

First Round Funding: Typically this is funding that accommodates growth. In First Round Funding the company may have finished its preliminary R&D, is looking for start-up funds, or needs financing to continue growth and momentum.

Follow-on Funding: Companies often require several rounds of funding. When a private equity firm has previously invested in a particular company, in many instances it can "follow-on" by providing additional funding at a later stage.

Intermediate / Second Round Funding: When a mature company is preparing itself for a future leveraged buyout, merger, acquisition or public offering; additional funding is often required to prepare the business for this next level of growth.

Later Stage Funding: Funds are needed to support major expansion or new product development by an established and mature business. Company is profitable or breaks even. This is a fund investment strategy that generates financing for the expansion of a company that is producing, shipping, and increasing its sales volume. Later stage funds often provide the financing to help a company achieve critical mass in order to position itself for an Initial Public Offering (IPO).

Mezzanine Funding: Refers to the stage of a company's venture financing when its progress requires additional funds in order to initiate its next stage of financing or to position itself for an Initial Public Offering (IPO). Investors entering in this round have lower risk of loss than those investors who have invested in an earlier round. Mezzanine level financing can take the structure of preferred stock, convertible bonds, or subordinated debt.

Seed Stage Funding: This is an initial stage of a company's growth. The company's founders are managing the organization, and this stage is characterized by business plan development, prototype development, and beta testing.

Wash-out Round Funding: A financing round where previous investors, the founders, and management experience a reduction in the value of their investment. The new investor usually gains majority ownership and / or control of the company following a washout round. Wash-out Rounds are sometimes referred to as a "burn-out round" or a "cram-down round