Investment opportunities, which 3Si Micro Venture & Holdings (3Si) works with, are typically startup companies at various points in their life cycle. The startup life cycle spans idea generation to an eventual exit through an acquisition or initial public offering with several inflection points throughout. Companies can be categorized in the seed, early and late stages of the startup life cycle.
Seed and Early Stage Investments
Seed and early stage companies are seeking capital to invest in product development, building a team of employees and formalizing customer acquisition strategies. While seed stage companies are focused on product development, early stage companies typically have a handful of users testing a beta product while fine-tuning their go-to-market strategy and building out sales channels.
- Focused on product development and preparing for a broader market launch.
2. Product is usually in use by early beta customers for testing and feedback.
3. Typically cash-constrained and seeking its first outside investors through family, friends and angel investors.
Seed and early stage investment opportunities are primary offerings, meaning the company receives capital raised by 3Si and uses it to invest in business development activities, additional employees and user expansion. Investments within this stage typically take 2 forms: convertible notes and preferred equity. The form of investment is dependent on the company’s relative maturity with seed stage investments typically structured as convertible notes while early stage companies issue preferred equity in exchange for investor funds. In institutional venture capital terms these are known as Series Seed, Series A and at times Series B.
1. Officially launched and focused on customer acquisition.
2. Implementing its sales channel strategy and attempting to reach break-even cash flow.
3. Generating revenue but pursing additional capital from institutional investors to invest in customer acquisition and business development.
Late Stage Companies
Late stage companies have demonstrated viability as a going concern and generally have a well-known product with a strong market presence. Late stage companies have generally reached a point of positive cash flow generation and profitability and begin to experiment with expanding into tangential markets. Early investors in late stage companies start to search for sources of liquidity thus leading late stage companies to position for a liquidity event, usually in the form of an acquisition or initial public offering.
1. Well-known product which has successfully penetrated its initial market and learned where and how to move next.
2. Cash flow positive and introducing its product into tangential markets.
3. Investors are seeking liquidity as the company begins to position itself for an acquisition or an initial public offering.
Investments made early in a company’s life-cycle typically require a long holding period and can be riskier relative to a late stage company with a well-known product on its way to market dominance. Understanding the life-cycle stage at which an investment will be made is paramount in accurately capturing the risks and return characteristics associated with that investment.
Get started presenting your company’s investment opportunities by booking an introductory appointment via our website at3Si – Book Online. We look forward to hearing from you, and possibly working together in aiding your company getting access to the early and growth-stage capital needed for success.
Image credit: CC by Oregon Secretary of State