Glossary - Staging
In venture capital and startup contexts, staging refers to the phased, strategic approach to investment, where capital is provided to a company in rounds or stages based on meeting previously agreed-upon milestones or objectives. This method allows investors to mitigate risk by evaluating the company's performance at each stage prior to committing further capital.
Also known as
- Phased Funding
- Tranche Financing
- Milestone-based Funding
Use cases examples
- Term Sheet: The investment will be executed in three stages, with the initial stage funding of $2 million to be released upon closing the deal. Subsequent funding stages are contingent upon the company reaching specific, predefined operational milestones.
- Shareholder Agreement: The shareholders agree to a staged investment schedule, where additional shares will be allocated to the investors at each stage of investment completion, subject to the satisfaction of the performance criteria set forth in Exhibit A.
Considerations for investors
- Investors should define clear, achievable milestones in consultation with the founding team to ensure both parties are aligned on expectations for each stage of investment.
- Monitoring the progress of the company closely and maintaining open communication with the founding team throughout the investment stages can help mitigate investment risks.
Considerations for founders
- Founders should carefully consider the implications of staging on company control and operational flexibility, as meeting investor-determined milestones may affect decision-making processes.
- Understanding the criteria for advancing to each subsequent funding stage, and ensuring they align with the company's growth trajectory and strategic goals, is critical.
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