Christmas is over, now back to the serious stuff, at least until new years day. So far we have looked at how to finance your business at the early stage and growth stage. By now, you are well aware of what to look out for when approaching an investor and are readying yourself for additional if not final funding.

This final stage is characterized by expansion measures and maturity of the company. Your company has already established and expanded their customer base. The company has thus far been successful and their focus still remains on the sales and marketing function. An internal and external analysis should be done to fortify the ventures strengths and rectify or reduce its weaknesses. This will help the company determine its position in the industry and use it to leverage its entrance into the arena of public ownership or acquisition.  Sources of funding often associated with this late stage include:

Series C

This source of funding is used to raise the company’s existing operations and is often sourced from other private investors and the public via an Initial Public Offering.  The effect of this stage is a further decrease if founders stake in the venture that sees him/her own 20% -25%. The founders also have the option of setting the company up for acquisition in exchange for a smaller stake in the company. Series D, E and F use the same means of financing and are usually a repeat of this stage. Further sourcing however means that the owner is decreasing his/her stake with each additional round.

Mezzanine

Your company essentially seized being a start-up as it can fund its own operations and generate profits on top. It is now able to borrow large sums of money to pay back later in full without many hitches. This particular source is associated with debt financing and might see issue of bonds or debentures by the founder(s). Debt sources are used to assure the investors that the company will make profits since they imply a promise to make payments as and when required. This will require the firm to be valued and for a forecast to be made of what the firm will make. This method does not dilute the owner’s stake and instead makes the company liable to paying the debts. Not many entrepreneurs opt for this method since it affects the firm’s credibility should they fail to make due payments.

A risk associated with this stage is credit risk, which is the risk that the firm will not be able to make timely payments. Sourcing via debt implies a promise to pay and exposes the firm to inquiry when they are not met. An IPO (Initial Public Offer) also attracts scrutiny from the public who will demand value for their money and the best way this is shown is via dividend payout.