Everything you need to know about Series A funding

Series A funding

Series A financing (also known as series A round or series A funding) is one of the stages in the capital-raising process by a startup. Essentially, the series A round is the second stage of startup financing and the first stage of venture capital financing.

Similar to seed financing, series A financing is a type of equity-based financing. This means that a company secures the required capital from investors by selling the company’s shares. However, in most cases, series A financing comes with anti-dilution provisions. Startups usually issue preferred shares that do not provide their owners with voting rights.

Objectives of Series A Financing

Series A financing is primarily used to ensure the continued growth of a company. The common goals in the series A round include reaching milestones in product development and attracting new talent. In this stage of development, a company intends to continue the growth of its business to attract more investors to future rounds of financing.

In the series A round, the biggest investors are venture capital firms. Commonly, they are firms that specialize in investments in early-stage companies. The general rule is that capital is provided to companies that already generate revenues but are still in the pre-profit stage.

How Does Series A Financing Work?

Unlike seed capital, series A financing follows a strictly formal approach. Venture capitalists that represent the majority of investors in this round of financing are willing to complete the due diligence and valuation process before making an investment decision. Thus, these processes start every substantial series A funding.

The valuation of a startup is an essential part of series A financing. Unlike startups in the seed stage, companies looking to secure series A capital are able to provide more information that can be used to make informed investment decisions.

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