We often see in the media that a company has obtained X round of financing. What do the so-called angel round, A round, B round and C round financing mean? What do VC and PE mean? Let's tidy it up today.
The first investment of a startup is called angel investment. As the name implies, investors in Angel Wheel are like "angels", as if they don't care about the success or failure of your business. When your company doesn't have a complete product and business plan, or even just an idea, they will give you real money to invest. In addition to providing start-up funds for entrepreneurs, angel investment has a greater significance in giving entrepreneurs trust and support and encouraging them to take the first step and put their ideas into practice.
It can be seen that the investment risk of angel wheel is very high, so some people ridicule that the investors of angel wheel are "3F", that is, family (family), friends (friends) and fools (fools), because only these three types of people are willing to risk wasting investment and give you funds to "suffocate your dreams". Of course, this is an exaggeration. In fact, angel investment is a very professional job. They will also carefully select the evaluation items, and once they are right, they will get dozens or even hundreds of times of returns. Moreover, angel investment generally has a small investment amount, and even if it is wasted, the loss will not be too great.
Round A, B and C refer to the first, second and third financing of a startup company after the seed period. There may be wheels d, e, f and g in the back. The financing object is generally VC or PE, and some angel investments will also participate in the A round of financing. So, what's the difference between VC and PE?
VC (Venture Capital) mainly provides financial support for start-ups, but it is a little later than angel investment.
Angel, A, B and C are divided according to the time sequence of financing, while VC and PE are divided according to the operation mode of investment funds. VC generally operates in the form of venture capital fund and takes the form of limited partnership in legal structure. As a general partner, the venture capital company manages the investment operation of the fund and gets corresponding remuneration.
Compared with angel investment, venture capital is more cautious. They usually choose "potential stocks" with mature business models, or start-ups in a period of rapid growth, and they spend a lot of money, usually starting at100000 yuan.
Before investing, VC should not only conduct professional and meticulous screening, investigation and valuation of the startup company's projects, but also supervise all the affairs of the startup company after investing money, and provide necessary services and undertake some management work to ensure that the company spends money on the "cutting edge". But they don't want to control your company, but pursue a rich return on investment. Finally, they usually transfer their shares or sell them for profit after the company successfully goes public.
As the name implies, the investment risk of venture capital is also very high, nine times out of ten. However, high risks correspond to high returns. For VC institutions, as long as one of the investment companies of 10 is successful, it means a return of dozens or even hundreds of times, and the money lost by blind investment has already been earned back.
There are two main differences between PE(PrivateEquity) and VC: first, the operation forms of investment funds are different; Second, PE investment tends to the later stage of enterprise development.
The definition of PE is to invest in private enterprises (non-listed companies) in the form of private equity funds, so that enterprises can withdraw from profits when they are listed and acquired in the future.
In China, PE generally refers to mature enterprises that have formed a certain scale and generated stable cash flow, including mergers and acquisitions; A fund and mezzanine capital account for the largest proportion in capital scale.
Related Q&A: What does Series B financing mean? Angel investment (AI): It occurs in the initial stage of the company, which means that the company has the initial appearance of the product and can take it to meet people; Have a preliminary business model; Accumulated some core users. The sources of investment are generally angel investors and angel investment institutions. The investment scale is generally 1 10,000 RMB to 1 10,000 RMB. A round of financing: the company's products have matured, started normal operation for a period of time and have a complete and detailed business and profit model, which has a certain position and reputation in the industry. The company may still be at a loss. The source of funds is generally a professional venture capital institution (VC). The investment is between 65.438 billion yuan and 654.38 billion yuan. After a round of burning money, the company has made great progress. Some companies have started to make profits. There is no problem with the business model and profit model. It may be necessary to develop new business and expand new fields. The general sources of funds are mostly the last round of venture capital institutions, new venture capital institutions and private equity investment institutions (PE). C round of financing, with an investment of more than 200 million RMB: the company is very mature and not far from listing. Should have begun to make a profit, basically the top three in the industry. In addition to expanding new business, this round also has the intention of completing closed-loop business and writing a story to prepare for listing. The main source of funds is PE, and some VCS before will also choose to follow suit. Investment amount: RMB 654.38+0 billion, which will be listed after the C round, and some companies choose the D round of financing, but not much.
Related Q&A: What do the usual A, B and C rounds of financing mean and how to distinguish them? It's not that complicated. Just give a number according to the stage of financing. Just give a name according to the situation of each financing and the stage of financing planning. Generally speaking, the goal, scale and stage of each round of financing will be different:
Seed Wheel-Team √ Idea √ Product ×
The financier in the seed stage is usually in the initial state, with only ideas and teams and no specific products. Investors are generally relatives and friends, or entrepreneurs pay their own money. Of course, there are many seed investors now.
If your financing project has a team and an idea, it will immediately enter the final landing, then you can start the seed round of financing. The general project financing amount is about 6.5438+0 million, which may range from several hundred thousand to 2 million depending on the track.
Angel wheel-product prototype √ model prototype √
Angel stage projects are usually prepared by the team, with product prototypes and preliminary business plans, but they also fall into the strange circle of "finding people-making products-making products-nobody-finding people-making products-making products ...".
If the financing project has started and the product has begun to take shape, there are seed data or certificates that can show the growth rate, retention and repurchase of the data. At the same time, it has accumulated some core users, and the business model is in the verification stage. Then it is most appropriate to find angel investors or institutions and start angel round financing. The financing amount is about 3 million to 5 million.
PreA round-a certain scale √ market forefront ×
PreA round is a sandwich round, and financiers can decide whether they need financing according to the maturity of their own projects. If the overall data in the early stage of the project has a certain scale, but it has not yet occupied the forefront of the market, then the PreA round of financing can be carried out.
Round A-Complete Business Model √ Industry Leading √
For projects with mature products, complete and detailed business and profit models, and a certain position and reputation in the industry, even if they may be at a loss at this stage, they can choose professional venture capital institutions to carry out Series A financing.
At this stage, the financier can't just rely on ideas to raise funds, but must have users, including daily activities and monthly activities, have their own business model, have mature products that can compete with competing products, and have a certain market position.
Round B-verification mode √ business development √.
After a round of burning money, the project has made great progress, the business model and profit model have been well verified, and some have begun to make profits. At this time, the financier may need funds to support the development of new business and the expansion of new fields, so it is suitable to start a new round of financing by persuading the previous round of venture capital institutions to follow suit, or to find new venture capital institutions to join, or to attract private equity investment institutions (PE) to join.
Round C-Mature Projects √ Top Three in the Industry √
If the financier's project is very mature at this time, he can basically sit in the top three positions in the industry and is preparing to go public, then it is suitable for the C round of financing. At this time, in addition to further expanding new business, it can also lay a good foundation for completing closed-loop business and preparing for listing.
Wheels d, e, F- upgraded version of wheel c
In short:
The most important thing for BP of Seed/Angel Wheel is to know what it is doing. At this point, the project is in the stage of 0 to 1, and there can be a cake for moral integrity. The more attractive the painting, the better, and investors will buy it;
In the A round, the most important thing is to tell investors that "I have proved the value of the project and need money to get more users." At this time, the project is in the stage of 1 to 10000. In most cases, investors can already try out products, and the most convincing thing is beautiful user data;
Round B, the most important thing is to show that "I already have many users and need financing to drive the business model." At this point, the overall structure of the project should be stable. The next step is to tell investors the liquidity of the project at this stage and let investors have confidence in their return on investment.
If you have any questions about the difference between Round A, Round B and Round C, you can leave a message in the comment area or send me a private message directly.