I plan to do two beta readings with my current manuscript. The first one with the more devoted/patient/friendly readers (i.e. friends and selected family members), and the second with more people closer to actual readers.
Between these two beta readings, I'll involve a professional editor (for at least one round of editing–some editors have offers for a reduced price on a second edit I might feel necessary if they suggest big changes...)
After each round of reading/editing, I'll do a rewrite.
It's a waste of money to send something I know has faults to a professional editor and it's a waste of beta-reader patience to do the same to them. Always rewrite the text after each set of feedback.
You can count on writing the first draft once and then rewrite, rewrite, rewrite... and then if an agent/publisher gets involved, there is even more rewriting.
So I plan to do both of your versions.
The first beta (call it an alpha reading?) to get some external input in order to send a better text to the editor (don't want to waste money on stupid mistakes anyone but me would spot), and the second to get input from people who would like to read the text when for instance asking on social media groups for beta reading.
My self-edit roughly follows James Scott Bell's, "Revision and Self-Editing for Publication," with added stuff from other books, the internet, etc.
Speaking of editing. There are actually three types of editing:
If you're planning on sending the manuscript to a publisher/agent you should be ok with a line edit. If you plan to self-publish, the safest way to go is to do both a line and copy edit.
A developmental edit is probably only necessary if you (or your beta readers) feel your text needs it (or you feel you might even need a writing course but want to hear it from an editor...)