Everything You Need to Know About Startup Funding Rounds

Every business starts with a brilliant idea. No matter how feasible and unique the startup business concept is, though, it won’t turn its operations up and running without enough funding. 

One of the first stages of a startup is getting pre-seed funding, also known as pre-seed money or pre-seed capital. This is the initial investment your business needs to get started. The funds can come from your family, friends, or investors, or through crowdfunding. During this stage, you, the founders, work on the proof-of-concept or prototype.

What Is Seed Funding?

Seed funding refers to the initial money a startup company raises whether or not they manage to raise Series A. It is expected to support the growth of the company that can help the startup reach its first step: market research or product development.

This can be raised from the money of friends or family of the founders. For early-stage startups, the most common way to raise seed funding is with the help of angel investors. 

Unfortunately, seed funding is the endpoint for many startups. Before they even manage to begin their company, they are forced to close when their money runs out without getting any traction. Some also close their funding because they are not interested in raising money to prepare for future growth.

The general seed funding round is between $500,000 and $2 million. It may be more or less depending on the startup’s requirements.

What Is Series A Funding Round?

Once the startup gains traction on their key performance indicators (KPIs) depending on the industry’s KPIs, the Series A funding round follows. As the round of funding that comes after the seed funding, it comes with a lot of stress for founders. The funds are expected to be used in revenue growth, but they are not ideal for implementing the ideas for future growth.

The Series A funding round helps the company boost its current KPIs performance. The startup needs to develop a business model according to its plans. The investment is higher than the seed round, so it is usually around $2 million to $15 million. 

This round and all subsequent rounds are led by lead investors together with other investors. Having the first investor is crucial to encourage other investors while losing the first one can be devastating because this may cause others to drop out as well.