Typical amount raised: $600,000 Pre-seed startup capital is the first round of funding for many startups. During this stage, founders are usually still spearheading most efforts at the startup. Founders in the pre-seed stage often rely on “bootstrapping,” or gathering funds from friends and family rather than more traditional funding sources. Pre-seed funding covers the expenses for launching the seed startup.Pre-seed Funding
It can take months to years to secure pre-seed funding. However, in some circ*mstances — like if funding comes through early — development can happen quickly. Some don’t consider this stage a part of the startup process because it’s mostly preparation work for the seed stage, but pre-seed financing lays the groundwork for a strong base for your startup.
A popular metric for determining if it’s time to expand is burn rate, or the rate at which your startup is spending money before it’s profitable. A higher burn rate can be an indicator that it’s time to proceed to the next stage of series funding.
Seed Funding
Typical amount raised: $2.9 million
Seed startup capital helps fund market research and product development. During this stage, investors are mostly friends, family, and sometimes venture capitalists. Seed startups raise a median of $1 million. The amount of funds a startup needs during this stage varies depending on the industry, product, or service.
Seed startup financing helps get the seed startup off the ground and positions it for future growth. The majority of startups stay in the seed stage. This doesn’t mean they’re unsuccessful—founders and investors can still turn a profit with a seed startup.
Series A
Typical amount raised: $11.6 million
Founders look into Series A startup financing after their product gains a reliable user base and product-market fit. Typically, Series A startup capital supports expanding the startup’s product or target market. With Series A, founders focus on using these funds to maximize the ROI for themselves and their investors.
While these startups typically raise $2 million to $15 million, the median amount raised per investment is $400,000.
Unicorn startups push the average investment amount up — that’s why the average investment amount is $2.7 million. Investors expect a comprehensive business plan when you’re securing Series A startup capital. This plan should explain how they’ll make a significant profit from their investment.
This is also where the infamous “Series A crunch” occurs. This phenomenon refers to when a successful seed startup fails to secure Series A funding.
Series B Funding
Typical amount raised: $30 million
Startups in the Series B phase have a reliable user base and are usually performing well. Series B funds help startups expand to meet rapidly growing consumer demand. In this phase a startup is less risky, but it’s still important to focus on scaling sustainably.
These funds usually cover:
- Hiring industry leaders
- Expanding advertising efforts
- Growing the sales team
- Innovating proprietary technology
Most startups in Series B will turn to venture capitalists because they need a large amount of startup capital to achieve these goals.
Series C funding
Typical amount raised: $60 million
Series C funding is usually for expanding horizontally, which includes:
- Acquiring other businesses
- Developing new products
- Expanding into new industries
Investors expect a large ROI from Series C startups that’s not possible in other startup series stages. Investing at this stage is the least risky, as these businesses have a history of growth and generating revenue.
Series D+ funding
Typical amount raised: $105 million
While some startups expand to Series D or E, these cases are exceedingly rare. If a startup reaches Series D, this is usually due to a down round — meaning they didn’t turn as much of a profit as they’d hoped in Series C. If a startup moves to Series E, this is generally an alternative to going public.
