Are you looking forward to raising venture capital for your startup? It is crucial that your conduct in-depth research on the topic. As you understand the must-know features of Series A funding round, it will help your startup in achieving financial goals easily while also ensuring that you are able to provide in-depth information required by investors.
The domain of venture capital funding has transformed significantly in the past few years. In the modern era, potential investors are looking forward to achieving a desired set of milestones before they wish to commit to the funds as required by the business. By making sure that your startup is ready to raise Series A funding, you should be aware of the know-how of the funding scenario.
What is Series A Funding?
Series A funding is regarded as the first round of funding in which the long-term plan of the startup for profit-generation and monetization are crucial to attract potential investors.
A Series A funding for startups can help in accelerating the respective roadmap towards achieving your financial goals faster. At the same time, it also reveals where you are standing exactly while offering your startup ample confidence that you are performing well.
When Should You Consider Raising the Series A Funding Round?
Founders and investors reveal that Series A funding is usually imparted to startups capable of generating revenue but not yet making profits. The median time from achieving seed to Series A funding is around 18 months. A robust monthly growth rate of around 15 percent to 20 percent also helps in indicating that you are ready for raising funds.
While profitability of the startup during Series A funding is desirable, it is still not any requirement. It is important to consider unit economics -ensuring a business that is healthy throughout. Still, there is no strong answer on the best time to consider Series A funding. It will usually vary within sectors.
Founders reveal that startups typically have around 11 to 60 employees while applying for Series A -based on various factors like the sector.
How to Raise Series A Funding?
It will usually take around two months to get access to the term sheet. It refers to the outline of the core terms of investment -like total equity wanted by investors. Moreover, it might take around 4-6 months for closing the Series A funding round. However, the exact pitching process might take only some weeks. The given timeframe can be extended under specific scenarios. It is because the ongoing market downturn has made investors more careful with the respective cash.
While raising Series A funding, it is also crucial to ensure the presence of a legal counsel -preferably some external organization. It will ensure that the legal aspects of your business are viable. You can expect the legal costs to typically range between $5,000 to $50,000 -depending on drafting requirement, negotiation, and diligence level. The legal paperwork will usually include aspects like IP, company registration, regulatory compliance, and equity ownership.
How to Find the Right Investors for Series A Funding?
Selecting the right investors for Series A is pivotal for startups. As you are raising Series A, founders are expected to decide whether they should search for specialist or generalist VCs. Founders are also expected to choose between new and existing VCs.
It is recommended to conduct in-depth research while reaching out to potential investors. Analyze and find out what investors might be looking for in dedicated portfolio organizations. Most founders find it the most useful to leverage the existing network of investors and founders to come across new potential investors. Even if there might not be close scope of funding, founders are still expected to keep the network of potential investors intact.
Your efforts towards startup fundraising are integral aspects of securing the overall success needed for your business. By following essential points, you will be effectively positioned to handle the requirements of Series A funding.
While VC fundraising is a great option for most startups, still it is time-consuming and will lead to equity dilution of your startup. If you wish to be free from the hassle of equity dilution, you can consider revenue-based financing to serve as the effective funding solution. It is a type of debt financing in which a lender will offer loan to a startup in exchange for some percentage of the respective revenues.