 CAPITAL STRUCTURING
'Capital structuring' refers to the type of financing with which a company is capitalized and the terms on which such finances are raised. The two types of capital are 'Equity' and 'Debt' and sometimes, hybrids are used for a specific period. Capital structuring is extremely important as it has a long-term impact on the financial viability of a start-up. Getting the right debt-equity mix in the capital structure is crucial.
Financial risk is taken in phases or upfront. The highest risk reward relationship is at the seed stage and the risks and rewards go down progressively as the business gets de-risked in each subsequent round of financing. Start-up firms go through rounds of financing starting from the seed stage to pre-IPO stage.
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