At present, financing has become an effective strategy for enterprises to rise rapidly and occupy the market. For domestic companies, what they are best at is bond financing, especially bank loans. However, with the gradual rise of equity financing, this financing method has gradually become the mainstream way for enterprises to obtain funds.

To put it simply, equity financing refers to the financing method in which the shareholders of the enterprise transfer part of the ownership of the enterprise and introduce new shareholders through the capital increase of the enterprise. In other words, equity financing can be regarded as a marriage between enterprises and investment institutions, and enterprises use part of their equity to obtain the resources they need, mainly capital. Because equity financing does not require the repayment of principal, equity financing has become the best choice for enterprises in the case of unsatisfactory bond financing.

It should be noted that not only listed companies can carry out equity financing, but every company can. Generally speaking, when an IPO (I) is implemented in a business, it is important to achieve an IPO (I

itial Public Offe

i

g, initial public offering) is often preceded by multiple rounds of equity financing, including angel rounds, A rounds, B rounds, C rounds, and P rounds

e-IPO round, etc. In addition to this, there are seed rounds, P

e-A round, D round, E round, F round, etc. Different financing stages, financing logic, benefits obtained, and risks faced are also different, as follows.

◆ Start-up angel round

Angel rounds of funding take place in the start-up stage of a business, that is, the company has just been established, or all the projects are still on paper and need to be injected into the start-up to turn some ideas and concepts into products that can create value. Generally speaking, the amount of angel round financing is not less than 500,000 yuan and not more than 15 million yuan, and the equity ratio transferred by the company is not less than 15% and not more than 20%.

Because the financing amount is small, the main investor is an angel round investor. The number of angel round investors can be more or less, with the largest investment amount being the lead investment, and the others being follow-up. The risk of angel round financing is that the company has just been established, and its future development is highly uncertain, and it may develop and grow, and it may go bankrupt and delisted. According to statistics, only 2.5 projects out of every 1,000 angel round projects can get Series C financing, and even fewer can achieve IPOs, and investors will be very cautious at this stage.

◆ Start-up A round

Series A financing refers to the financing process of the first formal introduction of strategic investors by the enterprise, at this stage, the enterprise must show KPIs to the investment institution if it wants to successfully raise funds. For example, if it is an Internet company, it is necessary to show the investment institution the number of daily active users, the amount of website transactions, the total number of users, etc., and use real data and results to convince the investment institution. Generally speaking, the amount of Series A financing is not less than 15 million yuan and not more than 150 million yuan.

Strictly speaking, there is also a P between the angel round and the A round of financing

Series E-A financing, also known as mezzanine financing. If in the process of Series A financing, the company does not want to accept the valuation given by the investment institution, or the investment institution is not willing to invest, it can carry out a P

Series E-A financing as a buffer. In general, P

The amount of the e-A round of financing is not less than 5 million yuan and not more than 15 million yuan, and the subsequent A round of financing is 25 million yuan.

The A round of financing introduces strategic investors, and the contact objects are mainly investment institutions.

◆ Growth period B round

The company's entry into the B round of financing shows that the project is developing well, the business model and profit model have been relatively mature, and it also has a certain reputation in the industry, hoping to raise funds through a new round of financing, launch new businesses and expand new areas. Generally speaking, the amount of Series B financing is not less than 200 million yuan, and there are two financing channels, one is to persuade Series A investment institutions to make follow-up investments, and the other is to persuade other private equity investment institutions to invest.

Whether a company can successfully complete a Series B financing depends on two main factors.

(1) Whether the valuation plan is reasonable. There are three commonly used methods for enterprise valuation, one is to value according to the price-earnings ratio, that is, the P/E valuation method; One is to value according to the contribution of a single user, that is, the P/MAU valuation method; There is also a price-to-sales ratio valuation, which is the P/S valuation method. China's investment institutions most often use the P/E valuation method when valuing enterprises, and they pay more attention to the profitability of enterprises than the coverage and growth of enterprises. Therefore, before proceeding with Series B financing, companies should weigh the pros and cons and choose a valuation plan that is beneficial to the future development of the company.

(2) The amount of the company's valuation in the early stage. Some start-ups have raised too much money in Series A, and the Series B valuation cannot support the Series A valuation, and the project development prospects are unobstructed, and the growth space is limited. In this case, it is difficult to have an investment institution to invest, and it is difficult to succeed in Series B financing.

◆ Growth period C round

Entering the C round of financing shows that the company has entered a period of steady growth, accumulated certain resources and experience, and the project is gradually maturing, and the main purpose of financing is to expand new business, form a closed business loop, and prepare for listing. Therefore, the financing amount at this stage is relatively high, generally more than 500 million yuan. After completing the Series C financing, some companies can be called "unicorns".

According to statistics, about 60% of companies will be eliminated from Series A financing to Series B financing, about 70% of companies will be eliminated from Series B to Series C, and only about 12% of companies can successfully enter Series C financing. After entering the C round, investors will be more rational.

◆ Mature P

e-IPO round

After the completion of the C round of financing, the company can carry out the D round, E round, F round, etc. according to their own needs. But in many cases, companies start planning for an IPO after completing a Series C round of financing.

Before the IPO, the company will raise another round of financing, which is P

e-IPO。 Most of the companies that have entered this stage are excellent enterprises and projects, and the investment methods of investment institutions are mainly private equity investment. If an investment institution wants to exit, it can only wait for the company to go public and sell its shares from the public capital market to cash out. In order to protect their own interests, investment institutions generally sign VAM agreements with financing enterprises.

P

On the one hand, this round of financing will raise the valuation of the company to a certain extent, and the company's income may shrink due to the high valuation after listing; On the other hand, as IPO supervision becomes more and more stringent and there are more and more regulatory "red lines", there is great uncertainty about whether enterprises can be successfully listed, and this uncertainty will increase investment risks to a certain extent.