Seed, Series A And Series B Funding: What Are They?
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For those in the investment, startup or entrepreneurial communities, the terms “Seed, Series A and Series B” may sound familiar. For the rest of society, it can sound like more business gibberish. These terms all have to do with the stage at which a company is seeking funding or capital.
Seed capital is exactly as it sounds — it’s the initial investment into a company. Just like a seed that will
eventually grow into a large tree, the concept of seed capital is the initial dollars invested into the
business with the hopes of future growth. Seed capital is usually the personal assets of the business
owner, as well as friends and family who may invest. A famous example of this is Jeff Bezos getting
$250,000 in seed capital from family in the mid-1990s to start Amazon. That is an example of seed
capital which grew into a huge tree. However, it should be noted that nine out of 10 businesses in the U.S.
fail within the first three years, so investing at the seed level of any venture has its risks as well as potential
Series A, Series B and so on refer to funding a company at various stages of the company’s growth and
various levels of investment. Unlike the seed level of funding, companies generally seek the Series level
of funding once they’ve started to show viability and some sort of track record. This is also usually the
time when a business can no longer rely on friends and family for funding and needs to seek
professional investors or institutions for capital. The following are quick summaries of the various Series
and their use:
Series A funding
Series A: The business has shown viability and interest from customers. The company may seek Series
A funding to optimize a product or penetrate deeper into a customer base or market. Investors at the Series A
stage are usually venture capital or hedge-fund type investors.
Series B funding
Series B: There is a saying that “B is for Build”. At the B stage the company is looking to take it to the
next level. Series B is like Series A in terms of optimization or customer penetration, but the dollar
amount raised in Series B is usually higher — usually more than $7 million. The investors in a Series B transaction
are like those in Series A. However, there may be additional venture firms willing to come in and invest
now that the company has shown it’s made it to this level of funding.
Series C funding
Series C: This stage is about perfecting, and of course, continuing to scale fast and wide. Companies can
raise into the hundreds of millions of dollars during this period. There may also be a wider variety of
investors, with private equity, pension funds, university endowments, investment banks, and other large
institutional players participating.
The information and opinions provided for informational purposes only and should not be construed as investment advice. Any opinions or forecasts contained herein reflect the subjective judgments and assumptions of the authors only and do not necessarily reflect the views of SagePoint Financial and should not be construed directly or indirectly, as an offer to buy or sell any securities mentioned herein. Investing involves risks in regards to all of the investment products mentioned in this commentary, including the potential loss of principal. Please note that individual situations can vary. Therefore, the information presented here should only be relied upon when coordinated with individual professional advice.
Securities and advisory services offered through SagePoint Financial, Inc. Member FINRA/SIPC and a registered investment advisor.
Tunde Ogunlana, CFS, Family Wealth Advisor, 5310 NW 33rd Avenue, Suite 206, Fort Lauderdale, FL 33309