A brief introduction to startup funding
Startups typically raise capital in ‘rounds’, related to the growth stage of the business and incrementally increasing in value.
Early-stage investment is inherently more risky for the investor, so they’ll receive more equity per dollar. As the startup builds traction and proves its business model, its value will increase, meaning later-stage investors get a more secure investment, but less equity for their buck.
The value of each round can vary wildly and is typically linked to the cost of building the business. Hardware-heavy startups, or those operating in highly-regulated sectors, for example, will need more money to get off the ground.
| Stage | Cheque Size | Definition |
|---|---|---|
| Pre-seed | $20,000 to $2 million | A pre-seed round might come from friends and family, individual angel investors, or from the founders’ own pocket. Typically pre-launch, this helps founders validate an idea or build a minimum viable product. |
| Seed | $500,000 to $5 million | A seed-stage business likely has a registered company and a product they’re selling. It will be working with customers to iterate and ensure product-market fit. |
| Series A | $4 million to $20 million (or more) | Usually a significant step up in value, Series A funding fuels growth in terms of user base and revenue. The startup will have traction, a go-to-market strategy and a scalable, repeatable business model. |
| Series B, C and beyond | $20 million+ | Later-stage capital will fund a startup’s scaling efforts — launching overseas, developing new products or exploring new sectors. At this stage, the business will be established in the market and moving towards profitability. |
