Series A

By the time a start-up raises a Series A round, it usually has a working product, some customers and evidence that its business model can work. Series A funding is used to expand the team, improve the product, enter new markets and build a repeatable way to acquire customers.

Series A rounds are usually led by venture capital firms, which receive preferred shares in exchange for their investment. Preferred shares often come with special rights, such as liquidation preferences, board seats and protections against future dilution.

For example, a software start-up with growing monthly revenue might raise a Series A round of several million from a venture capital firm, giving up perhaps 20% to 30% of the company.

The amount raised and valuations at Series A vary significantly depending on the industry, location and market conditions. Raising a Series A is often harder than raising seed funding, because investors expect clearer evidence of product-market fit. Many start-ups that raise seed funding never reach Series A. Later rounds, such as Series B and Series C, follow as the company continues to grow.