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About Early stage and related investment type

Early stage investing is defined as the provision of equity capital to companies that have not yet achieved stable, profitable trading.
The table below provides the definitions of specific types of investment within this broad category. The factor which unites all investments of this type is the significantly higher level of risk attached to unproven companies, markets, products, technologies and management teams. Uncertainty about future outcomes is endemic in all forms of investment, but applies to nascent or very young companies not only in every possible exercise, without the danger of the company agreeing a deal with a different investor.

Investment Type Purpose of funding Investee company characteristics Key objectives Typical Exit Horizon
Seed corn To develop, refine and market test intellectual property, prototypes or concepts Non trading, usually no firm business plan or commitment to a specific route to commercial exploitation at this stage
  • To test and verify the practical and commercial viability of the product or concept
  • To establish routes to market and a viable business model
  • To build a commercial management team
5 years or more
Spin-out To establish a business based on the transfer of intellectual property from a corporate or academic research environment Similar to seed corn, although conceptual or intellectual property
development may be more advanced
As with seed corn.
Replacing academic or scientific priorities with commercially driven
management objectives is often the major objective with spin-outs
5 years or more
Start-up To establish a viable trading concern with customers, revenues and a clear route to profit A commercially focused, backable and (mostly) complete management team will be in place To establish a sustainable market presence To make clear progress towards profitability To prove the management team Up to 5 years
Early stage To accelerate the progress of a young company Typically will not yet be profitable,  but will be able to demonstrate the  viability of its product or service and  markets Management team will have, to some extent, demonstrated their competence and effectiveness To achieve profitable trading and a  solid platform for growth 3–5 years