As a founder, you may have secured capital for the first time as seed fund which was invested by a VC or an Angel Investor. The funds served their purpose in helping you with operations, salaries of your team, proof-of concept, R&D and testing. After having achieved the development milestones and proof-of-concept at the early stage of a startup, it is time to attract investors for the next round of funding.
Series A funding is the first round of institutional funding that could be invested by one or more investors. Statistics indicate that odds in favor of getting the seed funding are 1:40, whereas in favor of Series A funding are 1:400. Well, you are right if that may seem difficult. However, it is crucial for your startup to not just secure the Series A funding, but do it at the right time.
Why Is Series A Funding Important?
Series A funding is “buyer’s market,” and investors have the luxury to decline investment to start-ups. The Series A round of funding provides a start-up to raise anywhere in between $2 million to $10 million against 15-25 percent of stake in the ownership of the company. The successful procurement of Series A funding will ensure that the revenue stream is in place, technology risks are removed, project is completed and the company is ready for the larger Series B funding.
Eulers Motors, a commercial electric vehicle manufacturer raises $2.6 million in Series-A round of investment from Inventus Capital. The company claims to utilize the capital to expedite the product and technology.
How To Get Series A Funding?
After knowing that series A funding comes after seed funding through an angel investor or VC, who measures your company against many standards, it should be entirely clear in our head that getting a series A funding is not a cakewalk… but not impossible either. You need an explicitly detailed and well chalked strategy to ensure that you are fully prepared. Let us share some insider tips to help you in the process.
Parameters of evaluation
As a founder, you should be aware of all the standards that VCs use to evaluate a startup. Usually, VCs look for the team, the management system, traction, validation of the idea, customer acquisition and the final product. Apart from this, VCs also take into account market space, location, target equity (ownership stake in the company) and stage of your startup- (Concept & Research, Commitment, Refinement, Scaling and becoming Established)
Think about the potential team
Unlike the seed stage, investors are more concerned about the potential to scale the business. Despite the fact that you have a core team in place, prepare a strategy for recruiting a quality team and expanding it in the coming years.
Find a lead investor
Invest generous time in finding a lead investor who complements your business. As you grow, advice will be as significant as money. The lead investor should have knowledge and contacts in your space which could help you in expanding your company. So find a lead investor which not only could help you with capital but provide guidance at less possible stake in the ownership.
Focus on the close
Even after VCs have consented to put money in your startup, the actual legal process is a lengthy one. It can take anywhere from 3-6 months to finish the paperwork. You should be prepared with a legal advisor and the necessary paperwork to facilitate the procedure
Terms of the deal
It is paramount to get the deal terms right and in accordance with your business goals and objectives. Even if you are determined to secure the first round of venture funding, you need to recall that closing the deal is not the only target. Focus on the terms of this round as it will serve as a foundation for all your future rounds of financing.
While every day dozens of startups secure funding, you need to acknowledge the fact that many investors will say no. You will have to start learning from that experience and break down what turned out wrong. Keep making changes until you secure Series A funding in line with your business goals.
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