Glossary - Series Funding
Series funding refers to the process through which a startup company raises capital in stages (or 'series') from investors, typically to fund business growth and development. Each round, designated by letters (Series A, Series B, Series C, etc.), usually represents a phase of expansion and comes with progressively higher amounts of funding and valuation criteria. The terms and amount of equity sold change with each series to reflect the growing maturity and valuation of the company.
Also known as
- Funding Rounds
- Equity Financing Rounds
- Growth Capital Rounds
Use cases examples
- Term Sheet: The company is looking to raise $10 million in a Series B funding round in exchange for 20% of its equity.
- Investor Presentation: With the completion of our Series A funding, we have successfully accelerated our product development phase and are now seeking Series B funding to expand our market reach.
Considerations for investors
- Risk vs. reward: Earlier rounds (e.g., Series A) typically have higher risk but offer potentially higher returns due to lower valuations, while later rounds (e.g., Series C) may offer lower risk but also lower return potential.
- Exit strategy: The timing and nature of potential exit opportunities (e.g., acquisition, IPO) can vary significantly by funding stage and should align with the investor's objectives.
Considerations for founders
- Dilution of ownership: Each funding round typically involves selling a portion of the company's equity, which means founders' ownership percentages decrease.
- Valuation expectations: Subsequent funding rounds often require showing progress and growth to justify higher valuations, impacting the types of investors attracted and the terms negotiated.
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