Series A round
Encyclopedia
A Series A round is the name typically given to a company's first significant round
of venture funding in the Silicon Valley
model of startup company
formation.
The name refers to the class of preferred stock
sold to investors in exchange for their investment. It is usually the first series of stock after the common stock
and common stock options issued to company founders, employees, friends and family, angel investor
s, etc.
Series A rounds are a critical stage in the funding of new companies. A typical Series A round is in the range of $2 million to $10 million and is intended to capitalize
a company for 6 months to 2 years as it develops its products, performs initial marketing and branding, hires its initial employees, and otherwise undertakes early stage business operations.
Because there are no public exchanges listing their securities, private companies meet venture capital firms and other private equity investors in several ways, including warm referrals from the investors' trusted sources and other business contacts; investor conferences and symposia; and summits where companies pitch directly to investor groups in face-to-face meetings.
Smaller investment amounts are not worth the legal and financial expense, the burden on a company of adjusting its capital structure
to serve new investors, and the analysis and due diligence
on the part of institutional investors. A company that needs money for operations but is not yet ready for venture capital will typically seek angel capital. Larger amounts are usually unwarranted given the cost of business in fields such as software, data services, telecommunications, and so on. However, there are routinely Series A rounds in excess of $10 million in fields such as pharmaceuticals, semiconductors, and real estate development
.
Series A rounds arising in the United States venture capital community, particularly in Silicon Valley, are widely reported in business press, blog
s, industry reports, and other media that cover the technology industry. There are many Series A rounds in other business contexts, underwritten by investment banks, corporate investors, angel investors, public agencies, and others, that do not often receive press coverage. They all share a similar legal and financial framework, but specific terminology, deal terms, and investment practices vary according to business customs within different countries, business sectors, investor communities, and geographical regions.
Venture round
A venture round is a type of funding round used for venture capital financing, by which startup companies obtain investment, generally from venture capitalists and other institutional investors. The availability of venture funding is among the primary stimuli for the development of new companies...
of venture funding in the Silicon Valley
Silicon Valley
Silicon Valley is a term which refers to the southern part of the San Francisco Bay Area in Northern California in the United States. The region is home to many of the world's largest technology corporations...
model of startup company
Startup company
A startup company or startup is a company with a limited operating history. These companies, generally newly created, are in a phase of development and research for markets...
formation.
The name refers to the class of preferred stock
Preferred stock
Preferred stock, also called preferred shares, preference shares, or simply preferreds, is a special equity security that has properties of both an equity and a debt instrument and is generally considered a hybrid instrument...
sold to investors in exchange for their investment. It is usually the first series of stock after the common stock
Common stock
Common stock is a form of corporate equity ownership, a type of security. It is called "common" to distinguish it from preferred stock. In the event of bankruptcy, common stock investors receive their funds after preferred stock holders, bondholders, creditors, etc...
and common stock options issued to company founders, employees, friends and family, angel investor
Angel investor
An angel investor or angel is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity...
s, etc.
Description
Series A Preferred Stock is the first round of stock offered during the seed or early stage round by a portfolio company to the venture capitalist. Series A preferred stock is convertible into common stock in certain cases such as an IPO or the sale of the companySeries A rounds are a critical stage in the funding of new companies. A typical Series A round is in the range of $2 million to $10 million and is intended to capitalize
Capitalize
Capitalization is writing a word with its initial letter in uppercase and remaining letters in lowercase. Capitalization may also refer to:* choice of case in text...
a company for 6 months to 2 years as it develops its products, performs initial marketing and branding, hires its initial employees, and otherwise undertakes early stage business operations.
Because there are no public exchanges listing their securities, private companies meet venture capital firms and other private equity investors in several ways, including warm referrals from the investors' trusted sources and other business contacts; investor conferences and symposia; and summits where companies pitch directly to investor groups in face-to-face meetings.
Smaller investment amounts are not worth the legal and financial expense, the burden on a company of adjusting its capital structure
Capital structure
In finance, capital structure refers to the way a corporation finances its assets through some combination of equity, debt, or hybrid securities. A firm's capital structure is then the composition or 'structure' of its liabilities. For example, a firm that sells $20 billion in equity and $80...
to serve new investors, and the analysis and due diligence
Due diligence
"Due diligence" is a term used for a number of concepts involving either an investigation of a business or person prior to signing a contract, or an act with a certain standard of care. It can be a legal obligation, but the term will more commonly apply to voluntary investigations...
on the part of institutional investors. A company that needs money for operations but is not yet ready for venture capital will typically seek angel capital. Larger amounts are usually unwarranted given the cost of business in fields such as software, data services, telecommunications, and so on. However, there are routinely Series A rounds in excess of $10 million in fields such as pharmaceuticals, semiconductors, and real estate development
Real estate development
Real estate development, or Property Development, is a multifaceted business, encompassing activities that range from the renovation and re-lease of existing buildings to the purchase of raw land and the sale of improved land or parcels to others...
.
Series A rounds arising in the United States venture capital community, particularly in Silicon Valley, are widely reported in business press, blog
Blog
A blog is a type of website or part of a website supposed to be updated with new content from time to time. Blogs are usually maintained by an individual with regular entries of commentary, descriptions of events, or other material such as graphics or video. Entries are commonly displayed in...
s, industry reports, and other media that cover the technology industry. There are many Series A rounds in other business contexts, underwritten by investment banks, corporate investors, angel investors, public agencies, and others, that do not often receive press coverage. They all share a similar legal and financial framework, but specific terminology, deal terms, and investment practices vary according to business customs within different countries, business sectors, investor communities, and geographical regions.
See also
- Venture roundVenture roundA venture round is a type of funding round used for venture capital financing, by which startup companies obtain investment, generally from venture capitalists and other institutional investors. The availability of venture funding is among the primary stimuli for the development of new companies...
- Venture funding
- Private equityPrivate equityPrivate equity, in finance, is an asset class consisting of equity securities in operating companies that are not publicly traded on a stock exchange....
- Preferred stockPreferred stockPreferred stock, also called preferred shares, preference shares, or simply preferreds, is a special equity security that has properties of both an equity and a debt instrument and is generally considered a hybrid instrument...
- InvestmentInvestmentInvestment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...
- Corporate FinanceCorporate financeCorporate finance is the area of finance dealing with monetary decisions that business enterprises make and the tools and analysis used to make these decisions. The primary goal of corporate finance is to maximize shareholder value while managing the firm's financial risks...
- List of finance topics
- Securities offeringSecurities offeringA securities offering is a discrete round of investment, by which a business or other enterprise raises money to fund operations, expansion, a capital project, an acquisition, or some other business purpose....
s