Key Milestones for Each Stage of Venture Capital Funding

Over the last decade, the funds raised by US startups at different VC funding stages have increased substantially. In this period, the median funds raised have at least doubled across seed to Series C rounds.

In the first half of 2024, the median funds raised by US startups at the seed stage was $1.3 million. Series A marked the first major leap, with median funding reaching $15.1 million. Series B funding rounds nearly doubled that amount, with a median of $30 million in the same period.

In recent years, median Series C funding peaked at $60 million in 2021 but declined to $49 million in the first half of 2024.

However, more funding seldom comes without more scrutiny. Hence, you must develop sound strategies to get the attention of VCs. To help you do so, we have listed some of the key milestones for startups at different VC funding stages. Read on to know more!

Key milestones for scaling to the next VC funding stage

Here we will discuss the key milestones and performance standards that startups must achieve to reach the successive VC funding stage.

Seed stage

The seed stage is typically the first of the VC funding stages. VCs would expect startups that are seeking seed funding to know what kind of business they would like to build. At this stage, the startup must know exactly which problem it is trying to solve, how it will solve the said problem, what it needs to execute its plan, and how it plans to commercialize its solution.

To succeed in your seed funding round, you must adopt strategies to get the attention of VCs, such as having a clear vision of your business proposition, commercial viability, and initial product development roadmap. Other important milestones would be securing the relevant patent rights and copyrights. Any steps that you have already taken towards product development will project you in a better light.

At this stage, VCs prioritize the strength of an idea and its market potential over immediate financial performance. For example, Safe Superintelligence Inc. (SSI) secured $1 billion in seed funding due to its vision of developing safe and ethical AI. This is an especially compelling proposition in today’s climate, where concerns about AI’s risks, impact on jobs, carbon footprint, and data ethics are growing.

Series A stage

When a startup approaches VCs for Series A funding, they expect to see startups who are ready to scale. At this stage, your startup must have a viable product prototype, exhibit traction in key markets, and demonstrate that your business model is scalable and commercially viable. To secure Series A funding, you should also address or at least identify any gaps in your core team that may hold you back from scaling the business.

You must validate your product-market fit through user engagement and retention metrics. This is an area where software-as-a-service (SaaS) startups have an advantage, as they can easily showcase key indicators such as monthly active users, customer retention rates, average time spent on the platform, and conversion trends from freemium to premium packages.

Other startups should similarly track relevant data points, such as repeat purchase rates, customer acquisition costs, referral rates, churn rates, and overall user satisfaction.

All of this should culminate into goals and milestones such as:

• Annual revenue of $1 million
• Healthy customer acquisition cost (CAC) to lifetime value (LTV) ratio
• Repeatable and cost-efficient go-to-market strategy
• Long-term contracts or high retention rates

Series B stage

the Series B stage, the median funding amount gets doubled and so does the scrutiny from VCs. Since this round also represents the first realistic potential exit for early-stage investors, incoming investors, who may need to buy out the stakes of exiting investors, will conduct extensive due diligence to assess the startup’s long-term scalability and profitability.

So, you will need to achieve VC funding milestones such as patenting key technology, strong partnerships, and network effects. VCs will want to know what sets you apart from your competitors.

While focusing mainly on product development and enhancing distribution channels, you should also make strategic investments in marketing. VCs indeed dislike startups that neglect product development in favor of chasing fame but they also hesitate to back companies that lack strong brand recognition with their target audience.

Additionally, you must identify viable opportunities to expand your product portfolio and enter new markets. This will buttress your startup’s commercial viability and long-term growth potential.

So, to secure Series B funding, you must focus your energy on the following milestones:

• Annual revenue of $2 million
• Significant improvements in CAC to LTV ratio
• Launch of the freemium (if not premium) version of the product into new markets
• Introduction of new products or features
• Comprehensive patent protection coverage for key proprietary technology and other intellectual property
• Evidence of significant traction such as market share growth and increasing customer adoption rate

Series C stage

Only about 3-9% of seed-funded startups successfully raise Series C funding. This low success rate is primarily due to intense competition and the natural weeding out of commercially unviable startups or startups that are unable to scale.

Therefore, when you approach VCs for Series C funding, they will expect you to present a financial history that backs your claims of successful commercialization and expansion. They will also want to know what structural changes you have made to increase your company’s unit economics.

However, financial performance is not enough and Series C investors will look for operational improvements as well.

Until the Series B stage, a startup can often operate with minimal production facilities. However, to secure Series C funding, it must establish a cost-efficient, scalable, and resilient production infrastructure. Some key non-financial milestones that you should consider targeting are optimizing supply chains, reducing order fulfillment time, and integrating automation solutions to enhance efficiency.

To enhance your chances of success in VC funding stages from Series C onwards, focus on achieving the following milestones:

• Annual revenue of $4 million
• Internalizations of various costs by increasing team size which improves your unit economics
• Convergence of Serviceable Obtainable Market (SOM) and Serviceable Addressable Market (SAM)
• Significant reduction in customer acquisition costs (CAC)
• Diversification of revenue streams through geographical expansion as well as introduction of new product lines
• Long-term contracts with suppliers who can comfortably increase supply
• Fortification of competitive moats through patent portfolio expansion, exclusive supply contracts, and a high degree of brand recall

Bridge funding rounds

When funds from previous rounds prove insufficient to reach the next full-fledged VC funding stage, you must open a bridge funding round to invite investments from existing investors or lenders who provide venture debt. At this stage, your startup will be judged based on the progress you have made towards the goals set in previous rounds.

Eqvista – Bridging the gap between innovators and investors!

When deciding whether to provide seed funding, VCs will primarily focus on your business vision and problem-solution fit while early product development progress and clear commercialization strategies will certainly strengthen your case.

Securing VC funding stages like Series A and Series B becomes much more achievable once you prove product-market fit, generate solid revenue, optimize your CAC-to-LTV ratio, expand into new markets, and build defensible moats. From there, to secure Series C funding, you must demonstrate strong financial health, diversify revenue streams, and most importantly, scale efficiently.

As you scale your startup, to bring your vision to life, you must retain control over your brainchild. To do so, navigating funding agreements with care is key since it will help you avoid legal pitfalls. With our expertise in venture capital, Eqvista can guide you through successful funding rounds without compromising your control. Contact us to know more!