Startups are the new common thing around the world because the youth of the world prefer to work on their own rather than being bossed around by someone else. But for a startup to be successful, it requires some outside funding as well. The funding is categorized into multiple parts and distributed accordingly. In this article, we will cover the Series A funding and compare Series A funding to others.
For most Startups and entreprenuers starting a company, Series A capital is a crucial stage of fundraising. It’s usually the second phase of money raising, as well as the first round of venture capital fundraising. Founders raise money by selling their firm shares, similar to the seed round, but there are some major differences.
What is Series A Funding
The company has client traction and some existing customers at the Series A funding level. Before moving on to a Series B capital raise, the purpose of Series A fundraising is to build and prove a business plan. Series A fundraising rounds are frequently seen as a critical stage in the development of a firm. Investors in Series A funding, are often more interested in a company’s growth prospects than those in earlier stages and eventually, companies hire more employees and even move to bigger offices.
The first investments made by venture capitalists are referred to as this form of finance. The startup is in a new category or at a critical juncture in its life, and the investor believes it is critical to become a part of it.
Series A round typically goes from $1 million to $5 million in size, with valuations ranging from $10 to $25 million. The investment size and valuation, on the other hand, are not set in stone. If the investor believes in the entrepreneur’s proposal, they may provide additional funding or a greater valuation.
How Seed Round is Different from Series A Funding
A seed round is a round of fundraising from angel investors or venture capital funds in which the funds are supplied in advance. Your staff and advisors, who may also be equity investors, are in charge of finding this money from sources such as friends or angel investors.
In most cases, a seed round is less expensive than a Series A round. It is employed by businesses who are willing to work with lesser valuations, such as those that are on a tight budget and require cash urgently. A seed round is only financed for a maximum of six months. A company’s value can be determined after a seed round based on growth, revenue, operational indicators, staff, and credibility. The majority of a company’s capital will come from a Series A round.
When to use Series A Funding
High-net-worth individuals with excellent industry ties who are seeking for high potential returns on investment are often Series A investors. As a result, businesses seeking Series A capital must be on the verge of being profitable, if not already profitable. Series A investors receive preferred stock in exchange for their investment, which pays larger dividends than the common stock normally granted to seed investors.
If the founder is able to acquire this financing, they will be able to lay a basis for future growth, increasing their prospects of raising a Series B or achieving success. It’s vital, though, not to start raising the Series A too soon. It will be considerably more difficult to raise funds if you start too early and do not have the appropriate metrics.
Series A funding is provided by venture capital firms and large businesses to entrepreneurs that have demonstrated their market potential. Hiring key workers, purchasing equipment, and increasing marketing efforts are all examples of how Series A capital rounds are utilized to build and scale a corporation. Before granting them the first round of funding, investors look for entrepreneurs who have a track record and can demonstrate that they have gained some traction.
SIgnificance of Series A
- The Series A round is important because it allows the company to demonstrate a business model, eliminate any lingering technological concerns, and build a growing income stream before moving on to the Series B round.
- Series A funding enables high-potential inventions to obtain the required resources for long-term expansion.
- Investors of Series A receive a larger share of the company they’re funding, effectively lowering the risk that startup founders must bear.
- A route lets a business grow and prosper while still having an exit, with the Series A round being the one to bet on and support as the business grows.
Series A Investors
Angel investors or a special purpose vehicle (SPV) can still invest at this level. However, it is usual for the founder to locate a lead investor who would attract other investors, such as family offices. Typically, the principal investor is a venture capital firm. At this level, top-tier VC funds may invest, but micro VCs are becoming increasingly important.
At this point, your next thought would be, how to find an investor ? And which investor is right for your business. So here is the answer.
Taking advantage of your current relationships could be one approach to identify the proper VCs. Checking LinkedIn connections and even current investors’ connections for possible new investors is a good place to start. Founders should network with angel investors who participated in the seed round to receive warm introductions to venture capitalists (VCs) who normally invest in the industry’s businesses. Soft pitching and soliciting feedback from everybody and everyone will provide the founder with a better understanding of who is interested and how they can strengthen their proposal in preparation for hard pitches and the Series A round.
Top Series A Funding
Here are some of the firms that have secured the most in Series A funding. You can look at their profile and get inspired to be one of them.
- Blue Ocean
A startup that claims to have developed an artificial intelligence-powered platform that can generate those insights, has announced $15 million in funding in Series A, which it will use to expand its technology following rapid growth. They announced their funding on July 21, 2021.
Tamara has a buy now, pay later platform that allows clients to pay over time. Tamara has raised a total of $116 million in four rounds of investment. Their most recent funding came from a Series A round on April 22, 2021.
Retailo began operating in Saudi Arabia and Pakistan at the same time. SME retailers benefit from the startup’s digitization of retail supply chains. Retailo Technologies has raised $45 million in five rounds of investment. Their most recent funding came from a Series A round on February 1, 2022.