Understanding the Series A Funding Round: What to Expect and How to Prepare
Series A funding for startups rounds are the seed money that leads startups to their Series B, C and D funding rounds. The amount that they invest in startups in this round depends on the idea, the strength of the founder team and other factors. It is important to know what to expect from each part of the funding round to prepare for it effectively.
The first round of venture capital investment in a startup is known as series A funding. Series A investors usually provide between 25% and 50% of the money raised during this funding round. In addition to providing capital for your business, they will also help you build your brand and grow your company’s revenue by providing advice on improving it.
The Series A funding round is the first in a series of funding rounds that you’ll need to raise if you’re going to grow your business. Investors usually provide between 25% and 50% of the money raised in this funding round. Investors seek a return on their capital, but they do not anticipate it immediately.
They want evidence that your company has excellent management, solid team members and a good business plan, so make sure those things are there before presenting yourself as an investor target! The best way to prepare yourself is by understanding what type of investor they are:
- Angels typically have less than $200k in capital available at any given time; however, they still want an active role in managing their investments (i.e., having meetings).
- VCs tend toward larger amounts ($10 million+) but require more involvement from management teams because of higher risk profiles associated with larger buyouts (i.e., fewer exits).
Generally, investors prefer to back deals that will yield one or two years of cash flow before they are expected ever to see a return.
This means that Series A investors typically want to know your business plan for growing revenues and profits within the next three years. They also want to see plans for sustainability and growth over time.
Series A investors usually provide between 25% and 50% of the money raised during this funding round, but they don’t expect a return immediately. Most startups raise money in only one round, while some companies have raised hundreds or thousands of dollars from several rounds. The Series A funding round is the first of multiple rounds a startup will raise. The goal is to fund the company’s operations, hire new employees and grow its business.
The money raised during this period will be used to:
- Hire new employees.
- Develop product vision and roadmap – what are you going to build? How fast do you want it done?
- Grow your team by adding more engineers or designers.
You don’t have to be rich or have fancy connections to get funding for your startup, but you do need to understand what investors are looking for and how this affects your startup’s business plan.
Funding for startups comes in all shapes and sizes, so investors must understand the challenges of scaling a new company before investing in it. This means understanding what it takes to build a successful company and how much time you’ll need as founder/CEO once things start.
If investors cannot see these things clearly, they might not want anything more than some cash upfront, which could mean losing out on an opportunity down the road when you really need their help.