Visualizing the Stages of Startup Funding From Pre-Seed to IPO
Connect with us

Financing

Visualizing the Stages of Startup Funding

Published

on

About 1,500 new companies are founded every day.

However, only a fraction of these entrepreneurial pursuits will eventually operate on a grand scale. With many of these companies propelled by venture capital funding, how do investors provide the cash—and get a piece of the startup pie?

Pie in the Sky

Today’s creative infographic from Fundera uses pie to visualize each stage of startup funding, from pre-seed funding to initial public offering.

It’s worth noting that numbers presented here are hypothetical in nature, and that startups can have all kinds of paths to success (or failure).

Visualizing the Stages of Startup Funding

Pre-Seed Funding

In the pre-seed funding round, the founder(s) pitch their business idea to potential investors. These are typically friends, family, angel investors, or pre-seed venture capital firms.

Since there is likely no performance data or positive financials to show yet, potential investors must focus on two primary features: the strength of the idea and the team.

The biggest factor in our decision-making is always the founding team […] that’s what success lives or dies on in this industry: the ability for founders to make really quick, good decisions.

First Round Capital

At this stage, both the level of risk and potential payoff are at their highest.

Seed Funding

After the initial stages, seed funding—the first official funding round for many companies—takes place. Entrepreneurs use the funds for market testing, product development, and bringing operations up to speed.

By this point, investors are generally looking for the company’s ability to solve a need for customers in a way that will achieve product-market fit. At this stage, ideally there is also some level of traction or consumer adoption, such as user or revenue growth. The level of risk is still quite high here, so investors tend to be angel investors or venture capitalists.

Series Funding

In each series funding, the startup generally raises more money and increases their valuation. Here’s what investors tend to expect in each round:

  • Series A: Companies that not only have a great idea, but a strategy for creating long-term profit.
  • Series B: Companies generating consistent revenue that must scale to meet growing demand.
  • Series C (and beyond): Companies with strong financial performance that are looking to expand to new markets, develop new products, buy out businesses, or prepare for an Initial Public Offering (IPO).

Private equity firms and investment bankers are attracted to series C funding as it tends to be much less risky. In recent years, startups have been staying private longer. For example, Uber obtained Series G funding and debt financing before going public.

Initial Public Offering

Once a company is large and stable enough, it may choose to go public. An investment bank will commit to selling a certain amount of shares for a certain amount of money.

If the IPO goes well, investors will profit and the company’s reputation gets a boost—but if it doesn’t, investors lose money and the company’s reputation takes a hit.

Here’s how the example investment amounts break down at each stage:

 Pre-SeedSeedSeries ASeries BSeries CIPO
Amount Invested< $1M<$1.7M<$10.5M<$24.9M<$50M<$10.5M
Average Equity Stake10-15%10-25%15-50%15-30%15-30%15-50%

An investor’s equity is diluted as other investors come on board, but their “piece of the pie” usually becomes more valuable.

The Venture Capital Funnel

How likely is it that a startup makes its way through the entire process? In a study of over 1,110 U.S. seed tech companies, only 30% exited through an IPO, merger, or acquisition (M&A).

Companies that reach a private valuation of $1B or more, known as unicorns, are even more rare at just 1%.

At each stage, natural selection takes hold with fewer companies advancing. Here’s a look at the entire funnel, with the “second round” generally corresponding to a series A stage, a “third round” generally corresponding to a series B stage, and so on.

venture capital funnel

Source: CB Insights

Notably, 67% of the companies stalled out at some point in the funding process, becoming either dead or self-sustaining. While startups carry a high degree of risk, they also present opportunities for substantial rewards.

Click for Comments

Technology

Companies Gone Public in 2021: Visualizing IPO Valuations

Tracking the companies that have gone public in 2021, their valuation, and how they did it.

Published

on

Companies Gone Public in 2021 Share

Companies Gone Public in 2021: Visualizing Valuations

Despite its many tumultuous turns, last year was a productive year for global markets, and companies going public in 2021 benefited.

From much-hyped tech initial public offerings (IPOs) to food and healthcare services, many companies with already large followings have gone public this year. Some were supposed to go public in 2020 but got delayed due to the pandemic, and others saw the opportunity to take advantage of a strong current market.

This graphic measures 68 companies that have gone public in 2021 — including IPOs, SPACs, and Direct Listings—as well as their subsequent valuations after listing.

Who’s Gone Public in 2021?

Historically, companies that wanted to go public employed one main method above others: the initial public offering (IPO).

But companies going public today readily choose from one of three different options, depending on market situations, associated costs, and shareholder preference:

  • Initial Public Offering (IPO): A private company creates new shares which are underwritten by a financial organization and sold to the public.
  • Special Purpose Acquisition Company (SPAC): A separate company with no operations is created strictly to raise capital to acquire the company going public. SPACs are the fastest method of going public, and have become popular in recent years.
  • Direct Listing: A private company enters a market with only existing, outstanding shares being traded and no new shares created. The cost is lower than that of an IPO, since no fees need to be paid for underwriting.

The majority of companies going public in 2021 chose the IPO route, but some of the biggest valuations resulted from direct listings.

Listing DateCompanyValuation ($B)Listing Type
08-Jan-21Clover Health$7.0SPAC
13-Jan-21Affirm$11.9IPO
13-Jan-21Billtrust$1.3SPAC
14-Jan-21Poshmark$3.0IPO
15-Jan-21Playtika$11.0IPO
21-Jan-21Hims and Hers Health$1.6SPAC
28-Jan-21Qualtrics$15.0IPO
09-Feb-21Metromile-SPAC
11-Feb-21Bumble$8.2IPO
26-Feb-21ChargePoint Holdings-SPAC
03-Mar-21Oscar Health$7.9IPO
10-Mar-21Roblox$30.0Direct Listing
11-Mar-21Coupang$60.0IPO
23-Mar-21DigitalOcean$5.0IPO
25-Mar-21VIZIO$3.9IPO
26-Mar-21ThredUp$1.3IPO
31-Mar-21Coursera$4.3IPO
01-Apr-21Compass$8.0IPO
14-Apr-21Coinbase$86.0Direct Listing
15-Apr-21AppLovin$28.6IPO
21-Apr-21UiPath$35.0IPO
21-Apr-21DoubleVerify$4.2IPO
05-May-21The Honest Company$1.4IPO
07-May-21Lightning eMotors$0.82SPAC
07-May-21Blade Air Mobility$0.83SPAC
19-May-21Squarespace$7.4Direct Listing
19-May-21Procore$9.6IPO
19-May-21Oatly$10.0IPO
26-May-21ZipRecruiter$2.4Direct Listing
26-May-21FIGS$4.4IPO
01-Jun-21SoFi$8.7SPAC
02-Jun-21BarkBox$1.6SPAC
08-Jun-21Marqueta$15.0IPO
10-Jun-21Monday.com$7.5IPO
16-Jun-21WalkMe$2.5IPO
22-Jun-21Sprinklr$3.7IPO
24-Jun-21Confluent$9.1IPO
29-Jun-21Clear$4.5IPO
30-Jun-21SentinelOne$10.0IPO
30-Jun-21LegalZoom$7.0IPO
30-Jun-21Didi Chuxing$73.0IPO
16-Jul-21Blend$4IPO
21-Jul-21Kaltura$1.24IPO
21-Jul-21DISCO$2.5IPO
21-Jul-21Couchbase$1.4IPO
23-Jul-21Vtex$3.5IPO
23-Jul-21Outbrain$1.1IPO
28-Jul-21Duolingo$3.7IPO
28-Jul-21Riskified$3.3IPO
29-Jul-21Robinhood$32.0IPO
22-Sep-21Toast$22.0IPO
22-Sep-21Freshworks$10.1IPO
23-Sep-21Remitly$6.9IPO
28-Sep-21Amplitude$6.4Direct Listing
29-Sep-21Warby Parker$6.0Direct Listing
14-Oct-21GitLab$11.0IPO
27-Oct-21Rent the Runway$1.7IPO
29-Oct-21Udemy$4.0IPO
03-Nov-21Allbirds$2.2IPO
04-Nov-21NerdWallet$1.2IPO
10-Nov-21Rivian$66.5IPO
10-Nov-21Expensify$2.2IPO
11-Nov-21Winc-IPO
11-Nov-21Weave-IPO
17-Nov-21UserTesting-IPO
17-Nov-21Braze$6.0IPO
18-Nov-21Sweetgreen$3.0IPO
09-Dec-21Nubank$41.0IPO

Though there are many well-known names in the list, one of the biggest through lines continues to be the importance of tech.

A majority of 2021’s newly public companies have been in tech, including multiple mobile apps, websites, and online services. The two biggest IPOs so far were South Korea’s Coupang, an online marketplace valued at $60 billion after going public, and China’s ride-hailing app Didi Chuxing, the year’s largest post-IPO valuation at $73 billion.

And there were many apps and services going public through other means as well. Gaming company Roblox went public through a direct listing, earning a valuation of $30 billion, and cryptocurrency platform Coinbase has earned the year’s largest valuation so far, with an $86 billion valuation following its direct listing.

Big Companies Going Public in 2022

As with every year, some of the biggest companies going public were lined up for the later half.

Tech will continue to be the talk of the markets. Payment processing firm Stripe was setting up to be the year’s biggest IPO with an estimated valuation of $95 billion, but got delayed. Likewise, online grocery delivery platform InstaCart, which saw a big upswing in traction due to the pandemic, has been looking to go public at a valuation of at least $39 billion.

Of course, it’s common that potential public listings and offerings fall through. Whether they get delayed due to weak market conditions or cancelled at the last minute, anything can happen when it comes to public markets.

This post has been updated as of January 1, 2022.

Continue Reading

Technology

The World’s Biggest Startups: Top Unicorns of 2021

Here are the world’s biggest startups with a valuation above $10 billion.

Published

on

Biggest Startups Top Unicorns of 2021 Share

The World’s Biggest Startups: Top Unicorns of 2021

Many entrepreneurs start businesses around the world, but only the most successful new companies become “unicorns”—the biggest startups with a valuation above $1 billion.

Some unicorns are little-known companies making quiet but impactful strides in software, healthcare, automotive, and other fields. Others have already become well-known industry leaders, like aerospace manufacturer SpaceX and game developer and publisher Epic Games.

In total, there are more than 800 unicorn startups globally. That said, this visualization specifically hones in on the world’s decacorns (unicorns with valuations above $10 billion) as of December 2021 according to CB Insights.

Private Startups Valued at Over $10 Billion

The world’s most prominent unicorns constantly see their valuations change as they enter different rounds of funding or maturity.

In December 2021, there were 35 startups with a valuation above $10 billion, spread out across different countries and industries.

CompanyValuationCountryCategory
Bytedance$140BChinaArtificial intelligence
SpaceX$100.3BU.S.Other
Stripe$95BU.S.Fintech
Klarna$45.6BSwedenFintech
Canva$40BAustraliaInternet software & services
Instacart$39BU.S.Supply chain, logistics, & delivery
Databricks$38BU.S.Data management & analytics
Revolut$33BUKFintech
Nubank$30BBrazilFintech
Epic Games$28.7BU.S.Other
Chime$25BU.S.Fintech
FTX$25BChina (Hong Kong)Fintech
BYJU's$21BIndiaEdtech
Xiaohongshu$20BChinaE-commerce & direct-to-consumer
J&T Express$20BIndonesiaSupply chain, logistics, & delivery
Fanatics$18BU.S.E-commerce & direct-to-consumer
Yuanfudao$15.5BChinaEdtech
DJI Innovations$15BChinaHardware
SHEIN$15BChinaE-commerce & direct-to-consumer
Checkout.com$15BUKFintech
goPuff$15BU.S.E-commerce & direct-to-consumer
Plaid Technologies$13.4BU.S.Fintech
Grammarly$13BU.S.Internet software & services
Devoted Health$12.6BU.S.Health
Faire$12.4BU.S.Artificial intelligence
Brex$12.3BU.S.Fintech
SenseTime$12BChinaArtificial intelligence
Bitmain Technologies$12BChinaHardware
Biosplice Therapeutics$12BU.S.Health
JUUL Labs$12BU.S.Consumer & retail
GoodLeap$12BU.S.Internet software & services
ZongMu Technology$11.4BChinaAuto & transportation
Global Switch$11.1BUKHardware
Celonis$11BGermanyData management & analytics
Weilong$10.9BChinaConsumer & retail

Many of the most valuable startups are already giants in their fields. For example, social media company Bytedance is the developer behind video network platform Douyin and its international version, TikTok, and has amassed a valuation of $140 billion.

Financial services and payment software company Stripe jumped from a valuation of $36 billion to $95 billion over the course of the COVID-19 pandemic.

Even less universally prominent names like Swedish fintech Klarna ($45.6 billion) and Australian graphic design platform Canva ($40.0 billion) are well known within their respective fields.

But private valuations don’t last forever. Many eventually go public, like electric vehicle maker and Tesla competitor Rivian, which had a valuation of $27.6 billion before listing on the NASDAQ.

The Biggest Startups by Industries and Countries

Breaking down the world’s biggest startups by industry highlights that tech is still king in most investing circles.

More than 77% of unicorns valued above $10 billion are categorized directly in tech-related fields, primarily in financial and commerce software.

Startups Valued Above $10B By IndustryNumber
Fintech9
E-commerce & direct-to-consumer4
Artificial intelligence3
Hardware3
Internet software & services3
Consumer & retail2
Data management & analytics2
Edtech2
Health2
Other2
Supply chain, logistics, & delivery2
Auto & transportation1

And many of the unicorns categorized in non-tech fields are still technology companies at their core. In fact, Indonesia’s logistics and package delivery company J&T Express is one of the few unicorns not directly in tech, though it still uses automated sorting in its warehouses.

It was one of the few startups to come from somewhere other than the U.S. or China, which together accounted for over 70% of the 35 biggest startups. The UK (3) was the next most-frequently listed headquarters, while Australia, Brazil, Germany, India and Sweden each had one of these unicorns on the list.

With constantly fluctuating valuations and technological breakthroughs always around the corner, the next $10 billion unicorn could come from almost anywhere.

Continue Reading

Subscribe

Popular