Private Placements used in equity financings can be set to raise capital amounts ranging from a few hundred thousand dollars to $10 million and more. The actual amount of money to be raised will depend largely on development stage of the business and the types of investors to which the company has access.
In Private Placement parlance, the stages of raising capital are referred to as “rounds”, with the earliest round taking place to raise “seed” capital as a business starts out. Later rounds typically get progressively larger as the business matures.
Here are the characteristics of each round from small to large:
- The Friends and Family Round – As the name suggests, this round usually takes place at the earliest stage of a company’s development. Presentations can be very informal as investors are usually very familiar with the business and its owner(s). The amount of money raised in this round depends largely on capital available to potential investors but, generally speaking, this round will be much smaller than subsequent rounds.
- The Angel Investor Round – Angel investors are accredited individuals who either make their own investments or invest as part of a group along with other angels. Angel investors have usually owned and operated their own businesses, making them well aware of the risks and roadblocks of a company in the early stages of growth. Investment presentations are done in a formalized atmosphere and business owners should be prepared to answer detailed questions about any aspect of the company.
- The Venture Capital Round – The “VC” round, if successful, will result in the largest infusion of capital to date for the business. This money often comes with strings attached as the VC’s jockey for a variety of advantages including seats on the board, majority ownership, the majority of voting rights, etc.
Navigation of these Private Placement rounds is best done by teams such as the one at Solvo Group, led by Dmitrij Harder. This experience and handling allows businesses to focus on their own operations while capital is raised by professionals accustomed to dealing with investors.