Later stage funding is funding a company obtains usually within a year before making its Initial Public Offering (IPO). Very often this funding is set up with plans of paying it back once the IPO is made.
Most companies will start off with a very small amount of capital, perhaps some equipment, a few employees, and maybe a location to operate in. After being in business for a while the company will probably begin seeking first-round funding. This is money that is intended to help it make initial growth into the industry, where it may encounter significant resistance and competition with related companies in the area. Once this is overcome, the company has more freedom to expand, but the company still has a ways to later stage funding.
However, the company will still need to continue expanding. Naturally there will still be resistance, but the barriers are not quite so solid as before, and if a company shows good sales and is seen to generally operating well, intermediate round funding may be possible. Otherwise the company may need to worry about just gaining funding from internal sources before it can begin expanding more completely.
Eventually, a company will get to a point where it intends to make its IPO. By this point the company has probably overcome many of the significant problems it faced earlier on. In taking upon it an IPO, however, it also taking on itself significantly more challenge than it previously faced. In order to better meet this latest challenge a company should begin seeking later stage funding.
By this point, the company should have a solid system in place for producing profit, dealing with problems, managing its assets, and taking care of its customers and employees. By continuing to streamline and find better technology and methodology, a company will make its chances for getting later stage funding far more likely.
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