What does series a funding mean

Think of these as stages that you have to go through to garner external funding for your startup. Technically, Series A, B, and C funding refer to the investor audience that compares returns against risks.

So, distinguish between multiple stages to communicate and bring investors on the same page. Founders essentially should learn about various components, processes, requirements, and payout options of series funding.

You can use funds to hire new staff, maintain business growth, or launch a new product. Each stage future-proofs the foundation of your business. The immediacy to acquire external funding is essential to building a robust startup.

Without consistent funding, you cannot increase or maintain optimal business growth. Once startup businesses complete the initial seed stage, it becomes vital to scale up the operations. So, engage and communicate with potential investors. Most startup investors also serve as venture capitalists. Fundamentally, a venture capitalist is a seed investor, angel funder, or private investor who offers financial backing to high-risk startups.

You have to communicate to the investors about the rendered value in exchange for capital. Fundamentally, investors lend suitable capital in exchange for an equity stake in the startup business. Today, founders have to grapple in an extremely competitive world of funding.

After the pre-seed and seed period, a startup turns to Series A, B, and C funding to increase business growth. Once a startup takes off, founders may seek the benevolence of potential investors to fund their new venture.

Startup founders have to prove the growth of their business to get traction. For instance, if you intend to roll out a product that has a lot of market interest, it may be enough to reach out to investors for the funds.

Once investors see the unique offering can render potential financial return, they will back you up with the required funding -- often after rounds of negotiation. The exchange value of the funding comes in the interest of equity ownership in the startup business for investors. The more your business grows, the more payoff investors can expect over time. If your startup business gets listed on the stock exchange, gets merged , or acquired , then you can successfully exit.

It means your investors will be able to make a huge return. Usually, VCs look for validation of the idea, traction, customer acquisition, the final product, the team, and management system. Apart from this, VCs also take into account stage of your startup, market space, location, and target equity. Unlike the seed stage, investors are more concerned about the potential to scale the business.

Even though you have a core team in place, prepare a plan for hiring a quality team and expanding it in the coming years. Invest substantial amount of time in finding a lead investor who complements your business. As you grow, advice will be as valuable as money. The lead investor should have knowledge and contacts in your space. Even after VCs have agreed to invest in your startup, the actual legal process is a lengthy one.

It can take anywhere from months to complete the paperwork. You need to be ready with a lawyer and the required paperwork to expedite the process.

The goal of Series A funding is to provide businesses extra capital to pay employees, perform market research, launch their product and develop a marketing strategy. It is generally the first or second round of funding for a startup depending on whether the founder had a seed round or if the business was self-funded. While angel investors are known for investing thousands of dollars in a business during the concept phase, Series A funding generally requires proof of concept.

This means that market tests have shown a demand for the business and room for growth into a multi-million or even billion-dollar company. When negotiating the investment, investors and founders decide on a fair valuation for their company based on equity. The factors investors consider when determining valuation include:. After a business has launched its initial products and started making money, founders can pursue Series B funding to move from development to expansion.

Business owners seek a cash injection from venture capitalists to flood the market, refine a brand or develop new product lines to capture a wider audience of customers. Series B funding has a high level of risk because businesses that succeed in a small market may not be able to survive and grow in a larger market.

Businesses trying to capture market share have the challenge of educating the public about their product or brand while competing with well-known businesses that have steady cash flow. Series B investors may account for this risk by asking for more equity. Business owners need to protect their equity and valuation during the Series B round of funding to ensure that the valuation reflects the growth of their business.

Series C funding has the goal of preparing a company to be acquired, go public on the stock market or undergo significant expansion. It is usually the last stage of fundraising a startup goes through, although some businesses pursue additional rounds to raise more capital. While previous rounds of funding use investment money to start making money and carve out their space in the market, Series C funding funnels large amounts of cash into profitable businesses to scale them up as quickly as possible and get a fast return for the investors.

A venture capital firm goes for this round of funding when the company has proved its mettle and is a success in the market. The company goes for Series C round of funding when it looks for greater market share, acquisitions, or to develop more products and services.

Series C round of funding can also take place to prepare the company for an acquisition. Valuation of the company at this juncture is done on the basis of hard data points.

This round of funding is more of an exit strategy of the venture capital firm.