Types of Investments
In my research of the economic news regarding the pharmaceutical industry, I came across lots of news regarding investments and financing with different companies providing series A, B and C funding. And with this being such an important component in the industry, with investments providing the means of progress in the industry in terms of new drug innovation, I dedided to explore what these investments mean and what they involve.
Investors look at companies and value it, considering management, track record and market size. Capital is raised and different rounds reached when the company begins to show; Increased probability of success, proof of concept and growth in market base. Investors that raise capital want in return shares of the business.
The first type of investment that is carried out in the very beginning is called Seed Funding. This is often carried out when the business consists of one person, or a with just a few business partners. It can mean that you already have a product that is selling well or have an innovative idea.The money would often be implemented to market research and development work. It would help the company figure out its product and what type of consumers they will be targetting. This type of investment is not as common as the other types we will see, mainly because it is seen as a risky move, since it is right at the beginning of a businesses life, there is no proven track record of success. That is why venture capital firms rarely particpate in this type of investing. The more typical type of investors that provide seed capital are angel investors. These tend to be affluent individuals who provide the capital wanted.
The first round of investing is the Series A funding. Series A funding is used when a business has made progress with seed capital, proof of concept, market size, quality of team. The funding is used to optimise the product and expand its market reach. The money typically provided ranges from $2 million to $15 million and is used to scale the product across different markets. Series A funding hopes to cover salaries of the people involved, additonal market research and finalisation of the product. Series A, is the most risky type of funding out of all the rounds. The more typical venture capital firms partcipate in this type of funding more than angel investors.
The next round of investing after Series A is Series B. This is type of investing is for taking the product to the next step. This involes scaling it up, to face competitors and to have its own market share. Investment risk is lower at this stage and a greater capital is provided ranging from $7 million to $10 million. Series B involves the same venutre capital firms as in Series A, but also introduces companies that are more specialsied in the later stage of investment.
Series C funding involves investors providing capital for an already succesful business. Series C involves perfecting the business model and contuning to scale and expand it across all markets. This involves it looking to increase its market share by acquistions or developing new products and services.At this stage where investing is less risky, a lot of other players are introduced such as hedge funds managers, invesment banks and private equity firms. With the type of capital being reached raised ranging from single digit to hundreds of millions.