Investment Funding Rounds A, B, C and Investor Types (2024)

Back to blog

Investing

Investment Funding Rounds A, B, C and Investor Types (1)

Investment Funding Rounds A, B, C and Investor Types (2)
Investment Funding Rounds A, B, C and Investor Types (3)

Andrius Ziuznys

October 04, 2022

From the very beginning, a startup company with ambitious objectives and solid business ideas wants to conquer the market.

However, to achieve those goals, the founders require capital to develop a product, present it to the market, and build a consumer base.

In this article, you will learn about the 4 funding stages that startups usually go through before reaching an initial public offering (IPO).

What is a funding round?

A funding round is a stage at which businesses raise capital.

There are different levels of funding rounds: pre-seed funding, seed funding, series A funding, series B funding, series C funding, and sometimes startups proceed with series D and E rounds of funding.

The seed funding round, and series A, B, and C are considered to be the 4 official stages of funding.

All these stages raise progressively more money. However, less than 10% of startups that receive seed funding go on to raise capital in series A funding.

Investors participating in different funding rounds

The most significant difference is between pre-seed funding and seed funding rounds.

Pre-seed funding

The pre-seed funding stage is generally not included in the number of official funding rounds and the main investors during this stage are the founders themselves, their friends, family, and supporters.

Outside investors rarely, if ever, fund a pre-seed stage startup. Only an angel investor may be interested in funding pre-seed round companies. Angel investors are private investors that focus on funding small businesses for equity. An angel round funding amount may be from $100,000 to $250,000.

Seed funding

Seed funding is the first stage of the official funding process. In this stage, the startup founder and family members may still be among the main investors; however, angel investors and venture capital firms join the equation, too.

Pre-seed funding investors Seed funding investors
Founders Founders
Family Family
Friends Angel investors
Supporters Venture capital

If you're an investor looking to find funding information, Coresignal's company funding data can help you find the funding rounds and amounts for specific companies.

With this data, you can discover companies that have recently been funded and see data such as:

  • Funding date;
  • Funding amount;
  • Investor's name;
  • Acquisition information;
  • Name of the acquiring company;
  • And more.

Enhance your investment intelligence and discover new investment opportunities easily and at scale.

Download the free sample below to see a brief excerpt of our offering.

Main types of funding rounds

As mentioned before, there are 4 official funding stages: seed, series A, series B, and series C. In this section, we will discuss each of them in more detail.

Seed funding round

The seed round is the first step of external equity funding.

Venture capitalists, or, most commonly, angel investors, help the company establish a fundamental ground for running a business. With seed capital, startups can perform market research and develop their product.

External investments help build a successful business strategy, determine the target market, and pave the way to receive additional funding in the next startup funding stage.

The money raised from seed investors can vary significantly. For example, depending on the startup, the range can be between $500,000 and $2 million. And the companies that try to raise funds at the seed stage are valued between $3 million to $6 million.

Some companies don't pursue further funding rounds after receiving the seed financing. They raise capital required to get the operations going and then grow the business through their own revenue streams.

Series A funding

For the next stage, series A funding, the startup must have a business plan to develop a business model directed at a long-term profit. Once a customer base has been generated, a company has to figure out a way to monetize the startup idea in the long run.

The series A stage usually involves typical investors from venture capital firms such as Sequoia Capital, Google Ventures, and other investors. Angel investors also take part in this stage, but they usually have less impact than in the seed stage.

In this type of funding, potential investors look for companies that have a solid strategy for monetizing the business and a proven track record.

The financial resources for series A funding averaged $23 million in 2022 and the seed-funded companies proceeding with series A round are expected to have a pre-money valuation of around $24 million.

Series B funding

The third round mostly goes to companies that are well-established, have a successful business model, and are ready to scale their business to reach the next level. It's used to expand market reach and meet the raised demands.

Meeting the new demands requires more people to work toward the goal. As a result, the additional capital usually goes to developing a stronger team of professionals.

The investors interested in series B funding are similar to the ones in the previous round. The only addition is venture capital firms that specialize in startups of later stages.

The average funding amount for the series B stage was $33 million in 2020 and the median pre-money startup valuation was around $40 million.

Series C funding

The companies that are interested in series C funding are usually the ones that are looking to develop new products, conquer new markets, or acquire competitor companies in other regions. Also, it could be used to support the startup for an initial public offering.

In this stage, hedge funds, private equity investors, investment banks, and some other investors join the list of existing investors. During the series C round, investors provide additional funding in hopes to get at least double the amount back.

One of the reasons for this influx of investors is that, for example, private equity firms are usually interested in already established and successful companies with a proven business model rather than early-stage startups.

These institutional investors fund the company with large amounts of money, expecting to secure their positions as business leaders and not miss out on good business opportunities.

The average amount of money raised in series C funding was $59 million in 2020 and the average pre-money valuation of a startup was around $68 million in 2022.

Funding amount Startup valuation
Seed $500,000 - $2,000,000 $3,000,000 - $6,000,000
Series A ~$23,000,000 ~$24,000,000
Series B ~$33,000,000 ~$40,000,000
Series C ~$59,000,000 ~$68,000,000

Initial public offering (IPO)

Initial public offering refers to a private company's shares going public in the stock market. That way, any investor can buy shares and contribute to raising money for the company.

Usually, startups go through 3 seed funding rounds before completing an IPO.

Most companies finish their journey to IPO on the series C funding round, but some companies proceed to series D, E, F funding and more to grow further. Series D funding is a continuation of series C that entails more money. The same applies to series E, F, and others.

Other startup funding types

Other startup funding types include crowdfunding and loans.

Crowdfunding mostly refers to the collective fundraising of family, friends, customers, and supporters. This method is primarily done via social media. It's generally used when the startup struggles to raise money from other institutional investors.

Loans mostly refer to bank loans. However, it's not as attractive to founders because a bank loan must be returned no matter the fate of the startup.

For example, if you're funded by a VC firm, you won't have the obligation to return the money if the business fails. Instead, you'll be giving up some of the equity in case of success.

Startup funding sources

To sum up, here is a list of startup funding sources:

  • Own money;
  • Angel investors;
  • Venture capital firms;
  • Private equity investors;
  • Hedge funds;
  • Investment banks;
  • Crowdfunding;
  • Loans.

Investment Funding Rounds A, B, C and Investor Types (6)

Investment Funding Rounds A, B, C and Investor Types (7)

Summary

Startup companies go through 4 main funding rounds: seed, series A, series B, and series C. After that, they can reach an IPO and be listed on the public stock exchange so any investors can contribute to raising capital.

Each round comes with progressively more money. In the early stages of a startup, angel investors may fund the company, and in the later stages, venture capital firms, private equity investors, and other financial institutions may join the list of investors.

Frequently asked questions

How do funding rounds work?

Funding rounds are based on the startup's funding valuation, competitive advantage, cash flow, business strategy, and other metrics. Each funding round offers progressively more money and requires a higher startup valuation.

How many rounds of funding are required before IPO?

Typically, startups undergo 4 rounds of funding: seed, series A, series B, and series C before reaching IPO. However, companies can seek further funding of series D, series E, and so on.

How many rounds of funding can a startup take?

A startup can take unlimited funding rounds.

How many rounds of funding is normal?

The standard number of funding rounds is 4: seed, series A, series B, and series C.

What is a SAFE investment round?

SAFE investments refer to guaranteeing a proportionate amount of company equity in exchange for funding.

Investment Funding Rounds A, B, C and Investor Types (2024)

FAQs

What does series A B or C funding mean? ›

Series A, B, and C are funding rounds that generally follow "seed funding" and "angel investing," providing outside investors the opportunity to invest cash in a growing company in exchange for equity or partial ownership. Series A, B, and C funding rounds are each separate fund-raising occurrences.

What does Series B funding round mean? ›

Series B financing is the second round of funding for a company that has met certain milestones and is past the initial startup stage. Series B investors usually pay a higher share price for investing in the company than Series A investors. Series B investors typically prefer convertible preferred stock vs.

What is a Series C round of funding? ›

Series C financing (also known as series C round or series C funding) is one of the stages in the capital-raising process by a startup. The series C round is the fourth stage of startup financing, and typically the last stage of venture capital financing.

What are the types of investment answer? ›

Among the top 7 types of investments are stocks, bonds, mutual funds, property, money market funds, retirement plans, and insurance policies.

What is the C funding? ›

Series C funding has the goal of preparing a company to be acquired, go public on the stock market or undergo significant expansion, possibly through acquisition.

What is the difference between Series A and B investors? ›

What is Series B? Most Series A funding is expected to last 12 to 18 months. If a company still needs funds after this period to dominate its market, it can go through Series B funding. By the point a startup gets to Series B funding, it's already successful.

What happens after series C funding? ›

Series C funding is often the last round that a company raises, although some do go on to raise Series D and even Series E rounds — or beyond. However, it's more common that a Series C Funding round is the final push to prepare a company for its IPO or an acquisition.

What is a good Series A funding round? ›

The typical Series A funding round usually falls between $5 and $15 million, but the amounts can vary widely. Some startups with cost strategies may secure as little as $2 million, while high-performing companies in popular industries could raise over $50 million.

How long does a Series A funding round take? ›

Series A funding planning and preparation could take around six months, but the actual process of formally pitching investors could be as quick as a few weeks. But one thing always remains true: As you close each round of funding, you should be thinking ahead to the next round.

Which funding is best for startups? ›

Venture capital is funding that's invested in startups and small businesses that are usually high risk, but also have the potential for exponential growth. The goal of a venture capital investment is a very high return for the venture capital firm, usually in the form of an acquisition of the startup or an IPO.

What is the best investment type? ›

11 Best Low-Risk Investments for 2024
Safest Investments at a Glance
Investment ClassSafetyLiquidity
High-Yield SavingsHighHigh
Money Market FundsHighHigh
CDsHighLow
8 more rows

What investment makes the most money? ›

The U.S. stock market is considered to offer the highest investment returns over time. Higher returns, however, come with higher risk. Stock prices typically are more volatile than bond prices. Stock prices over shorter time periods are more volatile than stock prices over longer time periods.

What is the difference between Series AB and C shares? ›

Class A shares tend to have lower 12b-1 fees than Class B shares, making the expense ratio less than that which investors with Class B shares might pay. Instead of a front- or back-load, Class C shares generally impose an annual fee.

What is the difference between B fund and C fund? ›

Shares of the same fund offer different shareholder rights and obligations, such as different fee and load charges. Common share classes are A (front-end load), B (deferred fees), C (no sales charge and a relatively high annual 12b-1 fee).

How many years are there between series B and 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.

What is the difference between A and C funds? ›

Conversely, Class C shares generally become less economical than Class A shares when held over longer time periods. Class C shares, however, offer the flexibility to change investments among different fund families periodically, without paying front-end sales charges or (possibly) CDSCs.

Top Articles
Latest Posts
Article information

Author: Clemencia Bogisich Ret

Last Updated:

Views: 5836

Rating: 5 / 5 (60 voted)

Reviews: 83% of readers found this page helpful

Author information

Name: Clemencia Bogisich Ret

Birthday: 2001-07-17

Address: Suite 794 53887 Geri Spring, West Cristentown, KY 54855

Phone: +5934435460663

Job: Central Hospitality Director

Hobby: Yoga, Electronics, Rafting, Lockpicking, Inline skating, Puzzles, scrapbook

Introduction: My name is Clemencia Bogisich Ret, I am a super, outstanding, graceful, friendly, vast, comfortable, agreeable person who loves writing and wants to share my knowledge and understanding with you.