Fundraising 201: Advancing Beyond Seed Funding
Getting your startup off the ground with an initial seed funding round is a major accomplishment, but it’s just the beginning of the fundraising journey. As your company grows, you’ll need larger and larger amounts of capital to scale. The stakes get higher with each subsequent funding round.
In this article, we’ll provide a breakdown of the typical startup funding cycle beyond seed funding and tips for developing a compelling pitch deck and securing follow-on investments.
The Startup Funding Ladder
Seed funding helps launch and establish your startup. It allows you to build an initial product or service, bring on a core team, and attract your first customers. The average seed round is $1.2 million, according to PitchBook.
Once you’ve achieved product-market fit and have data indicating solid traction, it’s time to start thinking about a Series A to accelerate growth.
Here’s an overview of typical startup funding rounds:
Of course, these numbers can vary widely by industry, location, and specific company situation. The key is that each subsequent round is intended to provide exponential growth vs. the last.
Series A
The Series A is your startup’s first significant venture capital financing. The goal is to scale the business and prove repeatability.
The average Series A funding amount is $15 million, according to PitchBook. Some common metrics investors look for include:
It’s essential you have a solid handle on your metrics and can clearly articulate your progress since seed funding. Quantifiable milestones and KPIs are vital.
Some tips for nailing your Series A pitch:
Series B
A Series B typically raises $10–30 million and comes when you’ve found product-market fit and want to scale sales and marketing.
At this point, you should have a solid leadership team in place along with repeatable and scalable processes. You also need a detailed business plan for rapid expansion.
Here are some typical Series B milestones:
The Series B deck should cover:
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Series C
With a Series C funding round of $20–100 million+, you are an established business looking to maximize market share.
Key milestones investors want to see include:
The focus of the pitch deck is to demonstrate you have an ambitious vision and a defensible market position. Share 5-year projections illustrating rapid growth and profitability. Expanding globally is often part of the strategy.
You’ll need to highlight your competitive moat and barriers to entry. Strategic partnerships and M&A opportunities are big pluses. Significant due diligence will be done on your team, product, users, financials, and operations.
Series D and Beyond
Once you’ve raised a Series C, you are likely seeing over $100 million in annual recurring revenue and are ready to raise tens of millions more to claim definitive market leadership.
Each new funding round is harder to raise, so make sure you have surpassed targets and have grown aggressively since your prior round. Look for investors willing to write larger checks to minimize dilution.
Your deck should present a bold vision to dominate your industry. Demonstrate you have best-in-class talent and solid financial controls. Highlight the major milestones achieved to date.
Also, emphasize how you’ve built strategic partnerships and used M&A to accelerate growth. Discuss expansion into any new products, services, or geographies. Share contingencies and stress test your assumptions.
Raising Mega-Rounds: $100M+
In recent years, larger “mega-round” startup fundings have become more common, allowing companies to raise $100 million or more in a single round.
This trend has been especially prominent in fintech, AI/ML, cybersecurity, and other sectors. Some prominent examples of mega-rounds include Plaid ($250M), Gong ($200M), Scale ($155M) and OwnBackup ($167M).
Mega-rounds allow startups to make big bets for rapid expansion and optimize ownership ahead of potential IPO. They also let founders avoid spending too much time fundraising.
To raise a competitive mega-round, you need to demonstrate enormous market potential and present a clear plan for market dominance. Fast growth, savvy leadership, and operating leverage are key.
Special cases like corporate venture investors, growth stage VCs, and secondary markets can provide opportunities for mega-rounds earlier than typical VC timelines.
No matter how much you ultimately raise, remember fundraising is a lengthy process requiring patience and persistence. Stay focused on delighting customers, hire judiciously, and always be raising your next round! Let data drive your decisions.
With each funding round, your metrics and milestones must be exponentially more impressive. Scale aggressively, build an amazing team, and stay laser-focused on achieving product-market fit above all else. This proven formula leads to startup success.
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