Introduction

 Starting a new company usually requires some sort of initial funding or capital investment.
 For startup companies that aspire to be high growth, this financing most often comes from
private “angel” investors or Venture Capital firms.
 These investors specialize in funding risky, but potentially promising companies for a
significant return on their investment. 
 In the startup investing world, high-growth companies commonly raise several successive
rounds of investment as they grow the business from an initial untested product or service
into a proven, mature company that generates substantial revenue.
 These rounds of investment or “series” funding stages follow certain patterns, which have
developed over the years.
 The typical transactions of the different funding stages of startups are constantly
changing, and can vary by industry, region, and other factors. Still, there are many
similarities and patterns in the typical funding stages
 The series of funding stages typically includes 
1.Pre-seed or 
2. Seed, 
3. Series A, 
4. Series B, 
5. Series C, Series D, and sometimes Series E, and finally an IPO.
The “Series” in the name refers to the class of preferred stock. Some startups do
not need to raise Series D or E rounds in route to an IPO.
As a rough average, successful startups typically take 10 years to go from launch
to IPO and take around 2 years between each funding round.   
 Each time the company raises another round of funding there is a new valuation
of the company where the total value of the company is determined.
 For most successful startups, each funding round increases the total value of
the company, increases the amount invested compared with the previous
round, increases the total number of employees, and decreases the risk
associated with the company.
 Of course, most startups will not make it all the way to an IPO or successful
acquisition, but as they mature and make it to each additional round, the
chances of success generally increase. 
Pre-Seed

 Sometimes startup founders will raise a Pre-Seed round from their own savings,
friends and family, or early stage angel investors to fund the initial launch and
setup of the business.
 The amount raised typically is less than $500,000.
 There are exceptions depending on industry and resources, but it’s not common
for companies at this stage to hire more than one or two full-time employees, if
any.
 This funding round would be used to test out the founders’ hypothesis and
position the company to raise a traditional seed round. 
Seed Capital

 The Seed round is the most common way for companies to raise their first outside
investment.

 Seed round investments often come from a mix of family & friends, angel investors,
venture capital firms that specialize in early stage startups, and even other sources like
crowdfunding.

 The name “Seed” is of course a reference to the seed of a plant, and investors and
entrepreneurs hope that with this initial seed of capital, the company can emerge and
grow. 

 Seed funding amounts can vary significantly, but in 2020 the average amount raised in the
US for a seed round was $2 Million, with the typical range being $1 Million to $5 Million.
 The typical pre-money valuation for a company raising a seed round 
is $7 Million, with $4.5 Million to $11 Million being common
Series A

 Again, not all startups who raise a seed round go on to raise a Series A, but after
raising a seed round, the average time until a startup raises a Series A is 22 months.
 Series A fundraising usually comes from Venture Capital with some Angel investors
being common as well.
 To raise a Series A Round, a startup usually needs to show that they have a viable
business model through some sort of meaningful revenue or traction from the market.
 The funds raised for the Series A round would grow the company from the initial team
and offering into a fully fledged business operation.
 Series A rounds have grown in size substantially over the past decade, with the
average Series A round growing from $4.9 Million in 2010 to $20.8 Million in 2021 with
a median round of $8.9 Million. For context, there were about 650 Series A deals in the
U.S. in 2020. In the US in 2020, Series A Startups had a median pre-money valuation
of $23 million.
Series B

 The average time from a startup raising a Series A to raising a Series B is 24 months.
 Series B fundraising often comes from the same Series A investors, along with some VC
firms that focus more on more mature or late-stage startups.
 The Series B round is really about growth and scale.
 To reach a successful Series B round a startup has built out their team, proven their product
or service, and reached significant milestones.
 The Series B funds will then be used to expand operations, markets, and the overall
customer base.
 Companies also use the Series B round to build teams in departments that will grow with
the increase in customer demand like support, advertising, business development & sales
 The average Series B round in the US in 2020 was $33 Million. Most Series B Startups had
a pre-money valuation ranging between $30 Million and $60 Million with the average being
$58.3 Million.
Series C

 The average time from a startup raising a Series B to a Series C is 27 months.
 Series C fundraising comes from previous investors as well as later stage investors
like Private Equity Firms, Hedge Funds, and Investment Bankers if the company is
potentially closer to an IPO or acquisition.
 Companies that reach Series C are usually well established and known in their
industry.
 They will use the funds raised to expand into new geographic markets, acquire other
companies, and develop completely new product lines.
 For some successful startups, the Series C is the last round they will raise before an
IPO and the funds will be used to push and prepare the company for the IPO process. 
 The average Series C round in the US in 2020 was $50 Million. Pre-money valuation
often ranges between $100 Million and $120 Million, with some outlier “Unicorn”
companies reaching $1 Billion or higher. 
Series D,E,F

 Funding rounds beyond a Series C are less common and more complicated than
previous rounds, and therefore less homogenous in terms of size and purpose.
 Sometimes companies raise Series D or E rounds because they need another
boost of capital to expand and prepare for an IPO.
 Sometimes companies raise subsequent rounds in order to remain private longer
before an IPO. And sometimes a company will raise a Post C round because they
failed to achieve the goals and milestones they set in the Series C round.
 In this last case the valuation of the subsequent round may actually be the same or
lower than the previous round.
 This scenario is referred to as a “down round”, and though some companies go on
to success after a down round, it is not an ideal position. 
IPO

 An Initial Public Offering (IPO) is when a private company “goes public” and
shares in the company are listed and tradeable on a public stock exchange.
 IPOs allow founders, investors and other shareholders like early employees to
sell their shares (with certain regulations) and often make a significant return on
their investment.
 The process of going public usually has significant accounting, legal, and
marketing costs and preparations, but it allows shareholders to have a liquidity
event, and often allows the company to raise additional capital for continued
growth.
 Ideally an IPO is a successful transition and helps companies increase
awareness, reputation and overall market value, but sometimes IPOs go poorly
and the total value of the company decreases.