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Get In Before The IPO Crowds: Startup Investing 101

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If you're looking for an excellent way to get in on the ground floor of a profitable business, then you need to look into startup investing. Oftentimes, the gigantic profits are found by holding pre-IPO shares in a company acquired during one of several fund raising stages, sometimes worth 2000 times the initial investment. These are the stages that you should consider and which will be explained bellow.

The Internet Has Leveled The Playing Field

The great news is that, with the advent of the internet and crowdfunding, normal investors can get involved in these pre-IPO funding stages. It used to be that case that one needed huge amounts of money in order to be an Angel investor. The funding of startups used to be the purview of extremely wealthy individuals (Angels) or corporations who specialized in this type of investing (venture capital firms-V.C.'s). However, now companies are seeking out groups of normal people online to get involved in early funding rounds.

Startup Inverting Stage 1: Seed

Seed investing is the first stage of investing. At this stage a company might not even have a workable prototype of a product. It is not uncommon for a company to only have the design or concept, plus the business plan. The seed funding is designed to be used to help with the further development of the product, and more importantly any market research that will help guide the development of said product. In exchange for funding, seed investors will receive an equity stake in the company.

If you are the type that likes looking for the "diamond in the rough", then this is the stage of funding you might be interested in. There will be an abundance of companies searching for seed funding, and they will not have any track record, only a concept and a plan of action. Of course, you will not have to invest as much as you would for a the late stage funding of a company that already has a product line ready for launch. The risk is higher, and the rewards are more, should the company take off.

Startup Investing Stage 2: Series A Funding

This is the stage where the company really begins to take off. They are looking to raise money to move their concept into production, develop a distribution strategy, hire more staff, and begin advertising. This is the stage at which real concrete results start to be seen.

Startup Investing Stage 3: Series B and C Funding

These are the final steps before bringing the company public. At this point, the company has customers, is running advertisements, and has a track record. Series B is sometimes called the "build" or "bulking" phase. The company looks to increase the success of their product by getting more staff, increasing output, and drilling down on market research. Additionally, the funding might be used to expand the markets beyond the region.

Stage C funding is often used to acquire smaller companies that are seen as competitors and blockades to market dominance. The goal is to ensure that there are no credible threats in the marketplace before going public.

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