From ideas to investment rounds, types and funding stages of an innovative startup
The startup ecosystem is in constant ferment, populated by brilliant minds and innovative projects that promise to revolutionize entire sectors. But what exactly defines a startup? And, above all, how do you go from an embryonic idea to a successful enterprise, navigating through the various funding stages? This article is your comprehensive guide to understanding the world of startups, from their different types to their growth stages, and how to identify key moments to attract investments.
What is a startup? Going beyond the simple beginning
Often, the term startup is used generically to refer to any new business. However, a startup is distinguished by several fundamental characteristics: it is a temporary organization in search of a repeatable and scalable business model. It is not just a newly formed company, but an innovative project with exponential growth potential, often based on technology and innovation. The cofounders of a startup do not limit themselves to creating a product; they aim to solve a market problem in a unique way and quickly reach a vast audience of users or clients.
Types of startups: A universe of possibilities for every cofounder
The startup landscape is extremely varied. Although common imagination often associates them with tech giants, there are several categories, each with its own peculiarities.
Lifestyle startup
Born from the passion of one or more partners, these startups allow their cofounders to transform a hobby or an interest into a profession. The main goal is to generate sufficient income to support the founders' lifestyle, rather than extreme scalability. Think of a highly specialized niche blog or a small independent design studio. They do not necessarily seek external investors but focus on sustainability.
Small-business startup
These startups emerge to meet a specific need in a local or regional market. A small gourmet restaurant offering a unique experience, a high-quality craft shop, or a specialized service business fall into this category. Their focus is on creating value and jobs within the community, with organic and controlled growth. The company concentrates on quality and customer loyalty.
Large-company startup (or corporate venture)
Sometimes, even large companies behave like startups. These are internal innovative projects, divisions, or spin-offs created by established companies to explore new market opportunities, develop disruptive technologies, or respond to new competitive challenges. These initiatives benefit from the resources and experience of a large parent company but operate with the flexibility and agility of a startup.
Social startup
Social impact is at the heart of these startups. They combine business objectives with the mission of solving social or environmental problems, such as poverty, pollution, or access to education. They can operate as social enterprises, non-profit organizations, or hybrids, but their raison d'être is positive change, often using an innovative project to achieve their goals.
Scalable startup
These are the startups that dominate economic headlines: businesses designed for rapid and exponential growth. They aim to conquer large market shares, often globally, thanks to a repeatable and scalable business model. Companies like Airbnb or Spotify are classic examples of startups that started with a small team of cofounders and an innovative project and grew to become global leaders. They are the dream of many partners and co-founders and require significant capital.
Buyable startup
Some startups are created with the specific goal of being acquired by a larger company. They often focus on developing a niche technology, a specific algorithm, or a patent that could be strategically interesting for a larger player. The cofounders in this case are aware of their path from the beginning.
Unicorn startup
The term "unicorn" refers to a private startup (not publicly traded) that reaches a market valuation of at least 1 billion dollars. They are rare and represent the culmination of success for an innovative project and for its founding partners.
The funding stages: A startup's capital journey
A startup's growth path is marked by different funding phases, each with its own characteristics and capital sources. Correctly identifying them is crucial for the survival and development of any company.
1. Bootstrapped (self-funding)
Definition: In this initial phase, the startup is entirely financed with the personal resources of the cofounders (savings, loans from friends and family – the so-called "Friends, Family, and Fools," or FFF). The objective is to validate the idea, build a Minimum Viable Product (MVP), and gain initial traction without diluting ownership.
Identification: The startup operates with extremely limited budgets. Often, the partners work in shared spaces or from home, and the product is in a prototype or beta phase. There are no significant external investors.
2. Pre-seed
Definition: With a functioning MVP or prototype, the startup seeks initial external capital to further validate the market, begin building the initial team, and refine the innovative project. Typical investors include business angels, incubators, or accelerators.
Identification: The startup has a clear product vision, has conducted initial tests, and has begun gathering feedback. The funds raised are relatively modest, usually between €50,000 and €250,000 (data based on the Italian market, 2023-2024 values).
3. Seed (seed capital)
Definition: The Seed round is the first true "round" of funding. The startup has a product launched on the market, has demonstrated some traction (e.g., active users, initial revenue), and its business model shows signs of scalability. The objective is to refine the product, expand the team, and acquire a more solid user/client base. Key investors include high-profile business angels and venture capital funds specializing in early stages.
Identification: The company is showing positive growth metrics. The team is expanding, and there is a focus on scalability. Funding can range from €500,000 to €2-3 million, depending on the sector and the maturity of the startup.
4. Series A
Definition: At this point, the startup has demonstrated a "product-market fit" (the product meets a significant market need), has a validated business model, and solid traction. The objective is to scale the business, expand the team, optimize marketing and sales strategies, and potentially expand into new markets. The main investors are larger venture capital funds.
Identification: The startup presents robust and growing KPIs (Key Performance Indicators), a well-structured team, and an ambitious growth plan. Typical funding in Italy ranges from €2 to €10 million, but can be much higher in global markets.
5. Series B
Definition: The startup is now a well-established "scale-up" and seeks capital to further expand its market share, penetrate new geographical areas, develop new products, or consider strategic acquisitions. It has a proven ability to generate consistent revenue and strong potential for further growth.
Identification: The company has a strong market position and a track record of success. It needs significant capital (often tens of millions of euros) to finance rapid and extensive expansion.
6. Series C and beyond (Series D, E...)
Definition: These rounds are for mature startups, often leaders in their sector. Funds are used to consolidate market position, expand globally, acquire competitors, or prepare for an initial public offering (IPO) or acquisition by a larger company.
Identification: The startup has a very high valuation and significant market share. It is often close to an "exit" event for investors.
Conclusion: Your startup's journey
Starting a startup is an exciting and challenging journey, requiring not only an innovative project and a team of passionate cofounders but also a deep understanding of market dynamics and funding opportunities. From the bootstrapping phase, where each partner invests their own resources, to Seed, Series A, and beyond investment rounds, every step is crucial for the company's growth. Italy, with its regulatory framework for innovative startups, offers a fertile environment for those who want to embark on this adventure, with tax advantages that can make a difference. If you have a revolutionary idea and want to turn it into reality, understanding these mechanisms is the first step toward success.
Do you have an idea and are you still looking for the ideal co-founder?
It often happens: you have a brilliant innovative project but haven't yet found a co-founder with the right complementary skills to start the activity or the project itself. The search for an operational partner can be long and complex, and in the meantime, your idea risks remaining dormant.
Geentoo positions itself as the missing link between those with a great idea and those seeking a brilliant project, operating in what we can define as a "pre-startup" phase. The network allows you to publish your idea for free and automatically connects you with interested individuals compatible with your innovative project's specific criteria. The goal is to help you find the "missing piece" to create a team and turn your idea into reality, participating with their professionalism, without wasting valuable time. Don't let the lack of an ideal team prevent you from starting your journey. With Geentoo, you can take the first concrete step towards realizing your projects.
