Fundraising 101: The ABCs of Rounds
Fundraising is an often-necessary, and almost always time-consuming and confusing exercise for startups. At each round, there are new investors, metrics, valuations, and objectives to consider.
Even the delineation between rounds can be confusing — different industries, investors, and market conditions may have varying ideas of what a seed round is (or any other round), including the total amount and level of dilution. While not all companies follow the same financing path — some engage in IP-backed debt or debt financing — most VC-backed businesses follow a broadly similar progression.
Pre-Seed + Seed
At the company’s creation, initial funds typically come from family and friends, personal savings (“bootstrapping”), angel investors, or incubators.
Pre-seed and seed stage companies are often at the “ideation” stage, where their focus is on identifying and refining ideas for products or services. Investors at this stage focus on the strength of the founding team and the potential of the idea. Incubators are popular because they provide founders with processes and experience for this phase, along with funding and operational support like office space or access to technical resources.
Angel investors invest in early-stage companies, usually when a founder demonstrates the potential to create value. Angels typically invest in areas in which they are personally interested or experienced.
With pre-seed and seed funding, a product or service gets developed and initial sales begin. Companies may start generating one-time or recurring revenue, though in recent years revenue at this stage has been more “icing on the cake” than a requirement. When companies need additional capital to establish market traction or increase reach, they typically pursue a Series A round.
Series A
At the Series A stage, a company’s performance is central to investor decisions. Metrics that demonstrate market receptiveness and consistency go far to demonstrate potential. During the 2020–2021 VC boom, many pre-revenue companies raised Series A rounds based on metrics like daily active users (DAU), customer acquisition cost (CAC), and product/market fit (PMF) rather than revenue. As interest rates rose through 2022–2023, investors shifted toward demanding stronger performance indicators — a pattern that recurs with each market cycle.
Companies seek Series A funding to scale their team, increase marketing, and accelerate product development. Series A raises vary widely, from a couple million dollars to upwards of $20 million.
Series B
The goal of a Series B round is to accelerate progress: faster product development, broader go-to-market efforts, and scaling to meet expected demand.
By Series B, a company should have a clear go-to-market strategy and strong traction. Many early-stage risks have been mitigated, and the focus shifts to growth. Investments at this stage come from venture capital and private equity firms, often at valuations determined by established VC valuation methods.
Series C
Series C raises generally focus on preparing the company for an initial public offering (IPO) or M&A activity — either as the target or the acquirer. Investors include late-stage venture capital firms, private equity firms, hedge funds, and investment banks.
Companies at this stage have established market share and are looking for new growth opportunities. While many go public after a Series C raise, others continue through further rounds (some reaching Series J and beyond).
Going public introduces significant costs beyond growth spending. Companies must invest in governance, regulatory, and compliance (GRC) capabilities — SOC 2, SEC disclosure requirements, financial reporting standards — that were not previously required.
Long-Term Planning
Most startups fail, and the number one reason is running out of capital. Given how much time and energy founders invest in their business, keeping long-term growth in mind is essential — additional rounds may be necessary to accelerate growth at each stage.
Every industry and field has a different growth trajectory. Some companies achieve self-sustaining growth after reaching revenue targets, while others require outside capital until a certain scale is reached. Decisions made early — particularly around equity dilution — can determine how easy or difficult it is to close later rounds. Giving up too much equity in pre-seed or seed stages can constrain Series A and beyond.
Planning for the possibility of future rounds should inform every early equity determination.
Our team helps companies put their best foot forward at each fundraising stage. We perform technology assessments to highlight valuable tech assets, provide strategic guidance to facilitate growth, and prepare valuations to help you understand what matters to your investors.
Related posts
Anthropic at $380B: What a 6x Valuation Jump in 12 Months Tells Us About AI Markets
Anthropic’s move to a $380 billion valuation is more than a headline-grabbing fundraise; it is a useful stress test for how AI markets are pricing growth, scarcity, and risk.
Read moreFASB Rewrites Software Cost Accounting: ASU 2025-06 and What CFOs Need to Know
FASB’s ASU 2025-06 replaces the old stage-based software capitalization playbook with a single recognition test, forcing CFOs to rethink policy, controls, and valuation.
Read moreMeta's $14B Scale AI Deal: The Biggest AI Acqui-Hire in History
Meta’s $14.3 billion Scale AI transaction is a minority-stake deal that looks a lot like an acqui-hire, with major implications for AI valuation and control.
Read more