In startup funding, we talk about preseed, seed, Series A, Series B, and so forth.

It sounds like each stage is just one step after the other.

When you finish your pre-seed round you raise your seed.

In reality, there’s a gap between seed and Series A.

It often takes several rounds of funding to close it.

Most startups raise a preseed, seed, seed+, seed++, and another bridge round for $250K, and then go to Series A.

This is often a surprise to first-time founders.

The reasons are as follows:

In most cases, the Series A is the first institutional round of investment.

The requirements regarding revenue, growth, margins, churn, and other factors are fixed and rigorous.

Prior rounds of funding were often made regardless of the results of the business but rather on the promise of future results.

Series A investors have specific requirements around valuation and ownership stakes. 

This often requires better metrics and more revenue to make it work.

It’s often the case that the founders have a vision for a specific valuation.

Specific valuation targets often require better metrics from the startup.

Make sure you plan for the gap between the seed and Series A in your fundraise.

 

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.
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Thank you for joining your host Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.
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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.