Early stage vc is provided to early stage companies. An early stage company is defined as a company that has tested their prototypes, refined their service model and prepared a business plan.
Some of these early stage startups might be making money already but aren’t profitable yet. In a nutshell, the company hasn’t matured yet being in the start up phase still.
Israeli venture capital is venture capital offered to early stage, high potential, high risk, growth start up companies based in Israel. To get a better idea of exactly what qualifies as an early stage company, let’s break down the process of becoming an established company from the ground up;
Stages Involved
Pre-seed Stage
In this stage, you are building your business model and collecting research to support your request to early stage vc firms.
Startup Stage
Now, you’re making your business model more credible by filling in the details.
Series A Funding
When a startup reaches this stage, it signals positive business growth.
Growth stage
Your product or service is in its final version and is evolving in the market.
Maturing Stage
In this stage, you begin to see some growth in terms of customers. New ones and returning ones at that. You also see growth in revenue gain.
Expansion or Exit Stage
In this stage, you decide whether to scale up your business or focus on high market value.
Why You Should Invest in Early Stage Companies and Startups
Early stage vc is associated with lots of risks and potential rewards as well. This is due to the nature of startups being so different from traditional investments. As an early stage vc firm, carefully weigh the potential risks and rewards before investing.
High Reward
Achieving profitable returns in this field takes a strong business mind accompanied with the ability to forecast the future viability of a start up you are investing in. On top of that, you need to be ready to cushion and suffer great losses if the startup goes sideways.
That said, the right choice can bring you great reward. You know what they say, the higher the risk, the greater the reward.
You effectively minimize your risk by investing in promising startups. You could do this by scrutinizing to detail the whole funding process which will help you acquire profit returns and additional profits in the long run. Now, I know you are wondering how to gauge a good investment without hard profit statistics as most startups don’t have those yet.
The business model will show if your investment is going to result in high reward once the company is on its feet.
Fresh Innovation and Ideas
Startups breathe fresh ideas and mindsets into the industry. By investing in the next generation of business, you are creating a new horizon that makes more innovation possible. One incentive business idea could yield you big results.
Disadvantages of Investing in Early Stage Companies
Splashing some early stage vc into a startup is not without risks and downsides.
Return Risk
There is always the question of whether the company will make revenue? Can they guarantee me return on my investment? If the answer is no or if you are unsure of the fact, evaluate other investment opportunities just to be safe. Most startups don’t have guaranteed return on investment and as such, extra caution should be taken.
You also run the risk of returns with delay in the case where startups take their time in making enough revenue for profits and return on investment.
Valuation Risk
Early stage venture capital like israeli venture capital comes with the added risk of overpaying for stock. Startups are difficult to assess because they aren’t valued publicly by market-driven stock prices like public trade companies.
