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What are the steps?
Seed funding is the first official equity fundraising that a company uses to raise funds for further growth and expansion. The money raised during seed funding acts as a “seed” to grow that business into much larger enterprise. It helps the companies to finance their early goals and requirement that will take the company into new heights in the future. One of the most common types of investors in seed funding is “angel investors”. An angel investor is a private investor who prefers to invest in a new startup in exchange for debt or ownership equity.
How to do it?
Step 1: Series A financing
The Series A round begins when your business is generating enough consistent revenue (or is otherwise performing well in other areas) that you can justify pursuing larger sums from investors in order to grow your business further.
For example, perhaps you’ve launched a basic iteration of an app idea that’s performed well during a test run in a relatively small market. You might then need additional funding to develop a stronger version of the app. To acquire it, you would thoroughly develop your strategy, presenting it to potential investors.
During the Series A round, investors who do choose to provide funding will usually invest between $2 million to $15 million, though these sums can vary depending on a range of factors.
Step 2: Series B financing
The strategy you developed during the Series A round will ideally yield results when you use the funding you’ve secured to implement it. When this happens, you’ll likely need more funding to ensure your business continues to grow at a consistent rate.
To return to the example above, after creating a stronger version of your app and growing your user base, you would probably need to fund marketing campaigns to help it reach even more users.
Once again, you would pursue this funding by presenting your strategy to investors and citing your current successes. During the Series B round, investors usually offer sums ranging between $7 million and $10 million.
Step 3: Series C financing
By the time you reach the Series C round, your business will already be a proven success. You might now be ready to develop new products, acquire businesses offering products similar to yours, or continue expanding. Luckily, if you’ve reached this stage, convincing investors to provide funding will usually be easier.
Those who invest in your company during the Series C round plan to offer large sums with the expectation of a large payoff, knowing that investing in a successful company is much less risky than investing in an unproven idea. On average, a startup will raise $26 million during the Series C round.
It’s common for startups to stop pursuing additional funding after Series C. That said, it’s worth noting that some companies proceed to the Series E and Series F rounds if necessary.
Client case study
Charlie Temple from Pave uses Zegal to record the binding terms in full that were discussed between parties during negotiation stage.