Raising funding for the business will always be a challenge. Most entrepreneurs will tell you that whatever amount you project as your financial needs, in almost all cases, this amount is an understatement.
There are several potential stages of funding. In some cases, the business may have sufficient resources to self-fund, but usually, outside help is needed. In the start-up phase, funding needs are limited. The anticipated needs are in the range of $50,000-750,000. The funds are used to show proof of concept through prototype production and alpha sites to get preliminary feedback on performance. At this stage, spending should be lean. Overfunding at this early stage can lead to wasting resources by running with a product before it is ready. It can also lead to valuation problems that can negatively impact future funding rounds.
In the development stage, the funding is usually around $500,000-3 million.In some instances it may approach $5 million. In this stage, the funds are needed for product development, pilot manufacturing, market development, beta-site testing, and product introduction.
Once products have been qualified and accepted, the company enters the expansion phase. The funding needs are typically $2 million or more, depending on the need for capital equipment and the ramp-rate for expansion.
The growth stage is signified by a steep ramp rate where all aspects of the company are growing including manufacturing, manufacturing engineering, marketing and sales organization with an emphasis on customer support, as well as new and advanced product development. The funding level could be $5 million or more.
Not all successful companies experience all of the stages. Sometimes very promising companies or companies that are very strategic to another company may be acquired at an earlier stage.
Online access to SPIE eBooks is limited to subscribing institutions.