What is early stage vs. late stage funding?

Bill Reichert, Managing Director at Garage Technology Ventures explains the difference between early stage funding when pitching your dream and late stage funding when pitching your operating company.

Bill Reichert has over 20 years of experience as an entrepreneur and operating executive. Since joining Garage in 1998, Bill has focused on early-stage information technology and materials science companies. He has been a board director or board observer at CaseStack, WhiteHat Security, ClearFuels Technology, Simply Hired, MiaSole, D.light Design, ThermoCeramix, and VisaNow, among others.

Transcript:

What is early stages vs. late stage funding?

Traditionally, the difference between early-stage funding and late-stage funding is the difference between selling the dream and selling an operating company, so that's kind of the distinction. Early stage is when you're still developing a product, you're going through alpha and beta, you may have some initial revenues but you really haven't scaled up the company yet. Late stage is generally after you've proven the business model, you've got some revenue traction, and now you're in the process of scaling up the business. So those are the key differences.

For entrepreneurs, the difference is how you pitch to investors and obviously which investors you pitch. So if you're pitching an early stage company you're selling the dream, right, you're selling the vision of what this could be. You don't generally have a lot of data, so the challenge when you're selling an early stage company, when you're pitching an early stage company, is getting evidence that what you've got is extremely compelling and will be highly competitive in a marketplace that you're going after.

So whatever data you can collect before the fact that you have a successful company, is going to be important when you're pitching an early stage company. A later stage company, what your pitching is your execution ability, the fact that you've been able to build a successful company, you've been generating revenues and now you're scaling. And so there you’re going to have much more data and the investors in late-stage companies are much more focused on your metrics. They want to see that all of the metrics of your business are trending in the right direction. So it's a very different pitch to very different investors at different stages of your company’s development.

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