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CMA Final · Entrepreneurship and Startup · Idea to Action

A startup has moved from the idea stage to building a prototype and now needs a small amount of capital, mostly from the founders' network, to validate the concept and prepare for its first customers. Which stage of funding does this describe?

This describes pre-seed or seed funding. It is the earliest capital, typically from founders, friends, family or angel investors, used to build a prototype, validate the concept and prepare for first customers. Public offerings, mezzanine debt and buyouts relate to far more mature businesses.

  1. AInitial public offering
  2. BPre-seed or seed fundingCorrect
  3. CLeveraged buyout
  4. DMezzanine financing before listing

Explanation

Seed and pre-seed funding is the early capital used for prototype building, market testing and initial team formation, often from founders, friends, family or angels. An IPO and mezzanine financing suit mature firms, and a leveraged buyout is an acquisition technique.

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