Late-stage funding

Late-stage funding

After an enterprise-backed business has created its goods and demonstrated that it has a chance in the marketplace, late-stage funding from venture capitalists takes place. This has significant earnings and is on the verge of a possible exit or refinancing event, like the disposal of the business or an IPO. 

What is late-stage funding? 

Organisations that are past the initial phase of creation with quickly increased sales or show an opportunity for rapid expansion are supported by late-stage funding. 

The businesses that are receiving funding become more firmly rooted in the industry. Also, as the money they invest may be turned into profit rapidly, late-stage capital is less hazardous for shareholders than the initial stages of investing. 

When an organisation’s service or good is broadly accessible, revenues can occasionally increase. If this happens, the business has the capacity to produce a significant cash flow and achieve financial stability on its own. Capital provided to businesses that have already achieved profitability but are yet to hold a securities offering is referred to as later-stage funding. 

Understanding late-stage funding 

Various phases of a company’s life can involve financing. For example, seed money focuses on businesses when they are just starting out. After the initial investment, there will be additional Series B or Series C financing. Naturally, latter-stage financing occurs at some point in the company’s life. It includes companies that are currently making a name on their own and are currently on the verge of earning revenue or are currently doing so. 

Entrepreneurs with venture capital supply late-stage finance. Entrepreneurs who make investments in startups are known as entrepreneurs with venture capital. A venture capitalist can buy equity from a company that needs finance. It’s a funding method that benefits both parties. Organisations can raise money by selling shares of securities. As the company expands and becomes stronger, the share of ownership that venture investors obtain may increase in value. 

Benefits of late-stage funding 

Companies can get funding without putting on more debt using later-stage funding. The majority of later-stage funding is categorised as capital raising, which entails selling stock shares to investors. A financial commitment or other form of debt is not required for businesses. Instead, they can work alongside a venture capitalist to employ later-stage investment. 

Successful mid-sized companies can receive the late-stage finance they require to grow into profitable enterprises. Several medium-sized enterprises often come close to becoming profitable, only to spend several years operating at a minor loss. These companies may receive the funding they require from late-stage investment to take them closer to sustainability. 

Importance of late-stage funding 

The ability of companies to access funding without incurring additional debt constitutes one of the most important benefits of late-stage funding. The majority of later-stage finance is categorised as capital raising, which entails selling shares of the company to investors. A loan and other forms of debt are not required for companies. 

Late-stage businesses are currently showing their viability and revenue. As a result, investors may relax knowing that their money is safe. Additionally, since the business has been founded, losses from unexpected market situations are less likely. 

Additionally, compared to initial investments, late-stage enterprises often offer significantly better potential for rewards. This is in order that shareholders may potentially see higher returns on their cash investments since these businesses have already created and introduced novel products or amenities that are bringing in money and making money. 

 

Examples of late-stage funding 

The following are some essential elements of latter-phase financing: 

  • Element 1: Can be funded with up to US$50 million with this form of funding. 
  • Element 2: Later-stage funding promotes public funding while assisting businesses in growing. 
  • Element 3: Established enterprises with expanding revenues might consider finance. 

Frequently Asked Questions

Late-stage businesses usually have an established item with a sizable market position and have shown that they can survive as an ongoing company. Typically, late-stage businesses have generated solid revenue and are experimenting with market expansion into peripheral areas. Nevertheless, there is a lot of risk involved in making assets across early stages and late-stage businesses. 

  • An established product that succeeded in entering its original marketplace and learnt where to go from there. 
  • It can have an abundance of cash or be expanding its item’s market. 
  • As the business starts to set itself up for a purchase or an IPO, buyers are looking for flexibility. 

 

In broad terms, a firm is said to be in its latter stages if it has established the viability of its idea and company structure and is outpacing its rivals in terms of revenue. 

Other traits of a late-stage venture or firm include: 

  • It is producing an advantageous cash flow. 
  • It has a popular item with a significant market share. 
  • It is beginning to grow into unrelated markets. 
  • Liquidity is sought after by traders. 
  • A withdrawal or refinancing event, like an auction or an initial public offering, is between six and twelve months off. 

The final round of cash obtained from shareholders prior to a redemption event is frequently late-stage capital. These resources enable business owners to complete any last-minute tasks they need to complete before selling or prior to releasing stock to the general public. 

Considering sales that are expanding quickly or are an opportunity for rapid growth, late-stage investments help businesses that have passed the initial phase of expansion. 

Growth equity is a kind of capital for growth commitment that occurs in late-stage enterprises through minority holdings like preferred shares. Such expenditures of capital are made in businesses that currently have a good match between their goods and industry and are searching for new ways to grow and scale. 

Shareholders in growth equity often engage shortly before an organisation enters the pre-profitability phase of its existence and may withdraw if there are tepid signs of success. Growth assets typically have quicker holding times, moderately low-risk levels, and greater yields. 

Early-stage capitalists often include seed-stage venture capitalists, angel financiers, and incubators for startups. They are prepared to offer support and special insights for assisting these young enterprises take off. Most often late-stage shareholders, hedge fund managers and growth-stage venture capitalists want to make investments before an initial public offering. 

    Read the Latest Market Journal

    Weekly Updates 4/3/24 – 8/3/24

    Published on Mar 4, 2024 16 

    This weekly update is designed to help you stay informed and relate economic and company...

    Weekly Updates 26/2/24 – 1/3/24

    Published on Feb 28, 2024 61 

    This weekly update is designed to help you stay informed and relate economic and company...

    All-in-One Guide to Investing in China via ETFs

    Published on Feb 27, 2024 393 

    Start trading on POEMS! Open a free account here! Why China? In the vast landscape...

    Navigating the Post-Inflation Landscape in 2024: Top 10 US Markets Key Events to Look out for

    Published on Feb 23, 2024 395 

    Start trading on POEMS! Open a free account here! In 2023, the United States experienced...

    From Boom to Bust: Lessons from the Barings Bank Collapse

    Published on Feb 23, 2024 62 

    Barings Bank was one of the oldest merchant banks in England with a long history...

    Decoding FX CFD 2.0

    Published on Feb 20, 2024 69 

    This article is aimed at availing information and knowledge essential to intermediate forex traders. It...

    Weekly Updates 19/2/24 – 23/2/24

    Published on Feb 19, 2024 89 

    This weekly update is designed to help you stay informed and relate economic and company...

    Unlock Prosperity with 5 Sure-Fire Financial Instruments!

    Published on Feb 14, 2024 200 

    In Singapore, the concept of guaranteed returns may evoke the spirit of prosperity, reminiscent perhaps...

    Contact us to Open an Account

    Need Assistance? Share your Details and we’ll get back to you

    IMPORTANT INFORMATION

    This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

    An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

    Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

    Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

    The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <www.phillipfunds.com> for more information in relation to the dividend distributions.  

    The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

    The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

    This advertisement has not been reviewed by the Monetary Authority of Singapore.  

     

    Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
    250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
    Tel: (65) 6230 8133 Fax: (65) 65383066 www.phillipfunds.com