Hello and welcome to Money Matters – the newest addition to the Astropreneurs’ ultimate online webtool! In this mini-series, we will briefly explore some of the best ways to get you started on the basics of financing your space startup. This should give you a certain sense of confidence and understanding of the process to ensure you can begin the journey comfortably.
Every aspiring entrepreneur, no matter the industry, should begin by familiarizing themselves with types of funding that a company can seek (from bootstrapping and seed rounds to series, mezzanine and exit strategies). You should begin by deciding whether the idea is indeed worthy of your own time and money, as well as that of others! Remember – your credibility is the true currency here. You only get a finite number of attempts at starting a company before you turn from being deemed ‘experienced’ to ‘incapable’.
To get you started, the following diagram depicts a typical startup company’s financing cycle:
Investment rounds generally progress as visualized above: investors offer cash and in return they expect to be rewarded with equity (“a piece of the pie” of your company). At early stage, a successful technique for you to consider is to skip equity finance completely by using the goodwill of founders and others by ‘bootstrapping’. Once you have conceived the idea, often external sources of financing can be considered through ‘seed’ rounds. Pre-seed and seed is especially useful to support fact finding- feasibility missions such as viability studies and market research. The real growth occurs in the so called ‘series’ phases and so additional financing to support minimum viable product (MVP) creation, iteration and building is crucial. The mezzanine stage is a stepping stone to expansion or to an initial public offering (IPO) and or exit.
The investor can profit later by selling their share of the company once its value has increased. Depending on financial ambitions and the riskiness of the idea, as the founder, you may choose to give away more or less of the company’s equity throughout different stages.
In the entries that follow you’ll get to see the various stages of the startup funding cycle along with some useful places to get started on your research as well as some ideas that might help jog your imagination.
Posted by Kacper Grzesiak and Niamh Higgins