7. Milestone: Funding – A, B and C Series
Company funding is the money that investors offer to a company, especially for startups who need large cash for their business growth.
A SERIES -FUNDING
Series A financing (also known as series A round or series A funding) is one of the stages in the capital-raising process for a start-up. Essentially, the series A round is the second stage of start-up financing and the first stage of venture capital financing.
At the same time, it is quite common for companies to issue convertible preferred shares. These shares offer investors the option to convert their preferred shares into common stock at a predetermined future date.
How much money is involved in the A Series, Funding?
The investment ranges from $2m to $15m (it may be more or less, depending on the company). The typical valuation for a company looking for an investment could be from $10m to $15m.
Investors expectation:
- Building up a traction number of users, revenue, and views.
- Founders demonstrating that the business model can earn money and become a significant player in the market.
- Primarily ensuring that there is continuous growth of the company.
- Reaching milestones in product development and attracting new talents (More Investors for future rounds of financing).
HOW DOES SERIES A FUNDING WORK?
It follows a strictly formal approach. Venture capitalists that represent the majority of investors in this round of financing are willing to complete the due diligence and valuation process before making an investment decision.
The valuation of a start-up is an essential part of series A financing. Unlike start-ups in the seed stage, companies looking to secure series A capital can provide more information that can be used to make informed investment decisions.
The goals of valuation in series A fundraising include the identification and assessment of progress made by a company using its seed capital, as well as the efficiency of its management team. Additionally, the valuation process demonstrates how well a company and its management use the available resources to earn profits in the future. Only when the due diligence and valuation processes are complete will venture capitalists invest in a company.
B SERIES – FUNDING
How much money is involved in the B Series, Funding?
The investment ranges from $7m to $10m (it may be more or less, depending on the company). The typical valuation for a company looking for an investment could be from $30m to $60m. Founders must demonstrate that the business model can earn money and become a significant player in the market.
Investor’s expectation:
- To grow the client base. For example, from 1000 to 10,000
- To grow the team
- To start looking at the different scales of products and services
C SERIES – FUNDING
How much money is involved in the C Series, Funding?
The investment can be as high as 30m (it may be more or less, depending on the company). The typical valuation for a company looking for an investment could be from $100m to $120m. Founders must demonstrate that the business model can earn money and become a significant player in the market.
Investor’s expectation:
- Turning the idea into a revolutionary product
NEXT SERIES OF FUNDING
Most of the companies finish with their investment in Series C. Just a few companies make it that far as Series D is considered the last financing round before IPO. There are also further rounds (E, F, G, H, and so on) where companies need constant funding. However, these rounds are mostly followed by the unicorn companies which are holding on to the IPO.
