Funding Round Types and Definitions

Funding Round Types and Definitions

Angel: An angel round of funding refers to funding by Angel investors (high net-worth individual investors) and Angel investor groups.

Pre-Seed: A pre-seed round can be defined as when a founding team (often pre-product) receive a small investment to hit one or more of the milestones they’ll need to ready themselves for “true” seed investment: from hiring a critical team member to developing a prototype product.

SeedSeed funding is the first outside investment in a company in exchange for equity. The amount varies widely from just tens of thousands of dollars to up to around $2 million. 

Series A: Series A Financing, or a Series A Funding Round, is usually the first significant round of venture capital financing for a company. In 2019, the Average Series A funding is around $11 million. However, its worth noting that rare, very large Series A rounds as well as much higher than average series A investments in biotech and pharmaceutical companies have made the mean Series A investment quite a bit higher than the median Series A financing, which is closer to the $7-8 million range in 2019.

Series B: While a Series A funding round is to really get the team and product developed, a Series B Funding is all about taking the business to the next level, past the the development stage. The Average Series B in 2019 is about $30 million.

Series C:  This is the last of early stage VC funding and generally occurs to to make the business appealing for acquisition or to support a public offering. In 2019, the average Series C is around $50 million.

Series D, Series E, Series F, etc: These later rounds of VC funding are not as common, and can happen for a few different reasons to prepare the company for a public offering or acquisition.

Venture Round - Undefined Series: Venture funding refers to an investment that comes from a venture capital firm and describes Series A, Series B, and later rounds. This funding type is used for any funding round that is clearly a venture round but where the series has not been specified. 

Equity Crowdfunding:  Equity crowdfunding enables broad groups of investors to fund startup companies and small businesses in return for equity. In the past equity crowdfunding was limited to accredited investors; today equity crowdfunding is available to all kinds of investors via crowdfunding portals.

Private Equity Round: A private equity round is a late stage round led by a private equity firm or a hedge fund. Private Equity firms typically take over much more control of a company and generally come in when companies have a proven business opportunity, but are not realizing their potential in terms of top line growth and/or operating profitability. These rounds tend to be very large, usually $50 million and up.

Convertible Note: A form of short-term debt that converts into equity, typically in conjunction with a future financing round.

Debt Financing: In a debt financing round, investors lend money to a company and the company promises to repay the debt with added interest.

Secondary Market: As defined by WikipediaThe secondary market, also called the aftermarket and follow on public offering is the financial market in which previously issued financial instruments such as stock, bonds, options, and futures are bought and sold. This is where investors purchase shares of stock in a company from other, existing shareholders rather than from the company directly. 

Grant: This is when capital is provided to an organization without any exchange of equity or promise to repay.

Corporate Round: You often see corporate rounds when a company forms a strong strategic partnership with another company. In this case, the one company is simply directly investing in another company.

Initial coin offering (ICO): As stated by InvestopediaAn Initial Coin Offering (ICO) is the cryptocurrency space's rough equivalent to an IPO in the mainstream investment world.

Post-IPO Equity: Round of Funding for publicly traded company.

Post-IPO Debt: A loan taken out by a publicly traded company.

Post-IPO Secondary: The sale of new or closely held shares by a company that has already gone public.

Topic: Series A Funding


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