A Quick Guide to Startup Fundraising
Don’t know your seed from your C round? New to the startup world and still getting the hang of what raising money is all about?
Here’s a quick summary of different stages of funding, what the cash is often used for, how much is invested and by who.
Typical use - Founder or founding team receive a small investment, often just at idea stage (they don't necessarily have a product yet!). Used to achieve a critical milestone, like creating a minimum viable product, in readiness for a true "seed" round.
Typical funding amount - <$500k
Typical valuation - $1M-3M
Typical investors - Friends & family, early-stage angels, startup accelerators.
Typical use - The seed round is all about fuelling growth beyond the founding team. It often funds hiring staff to accelerate product development and initial revenue generation.
Typical funding amount - $1M - $2M
Typical valuation - $3M-$6M
Typical investors - Angels, early-stage VCs, startup accelerators.
Typical use - Primarily to fuel revenue growth. Product market fit should be clear and new customers are being acquired. Sales, marketing and channel engines start being built through aggressive staff hiring.
Typical funding amount - $5M - $20M
Typical valuation - $10M-$20M
Typical investors - VCs, angels.
Typical use - Revenue growth through building for scale. Rapid expansion of team (especially sales and marketing). Investment and implementation in tools and systems.
Typical funding amount - $15M - $50M
Typical valuation - $30M-$60M
Typical investors - VCs, late-stage VCs.
Typical use - Fuels large scale expansions - e.g. new products, move in to new markets, geographical expansion and acquisitions.
Typical funding amount - $50M-$150M
Typical valuation - $100M-$150M
Typical investors - Late-stage VCs, private equity firms.
Series D, E, Etc....
Typical use - Continues to fund large scale expansions.
Typical funding amount - Varies a great deal the later the round.
Typical valuation - $150M all the way to unicorn status and beyond.
Typical investors - Late-stage VCs, private equity firms, hedge funds, banks.