Series A funding is often seen as the goal for startups. That is because Series A funding is usually the first round of funding that a startup has raised from “serious” investors. Meaning investors that aren’t well known by the startup founder(s).
This stage of funding is also seen as the main milestone because it means that the startup has likely done enough validation and has discovered the appropriate market to address with its solution.
Series A funding means it is time to scale
The statistic even supports the importance of Series A funding. In an article from CB Insights from March of this year, their research found that raising a Series B round (a round that follows after a Series A round) was actually easier than raising the Series A round itself.
So, why is a Series B easier to raise? Because most companies that raise a Series A are able to scale, at least to some degree, and scale is what an A round is all about.
One of the reasons that scale is the key activity is that the investors involved at this stage are likely to be much more focused on an exit in the future. An exit is, after all, how investors get a return on their investment. Whereas during a friends and family round your parents might have invested purely because they love you (one should hope).
At this stage of funding, investors are also very focused on getting a larger multiplier of their investment after a Series A funding round. We aren’t talking about a 5x return after a Series A. We are talking about a 20x return. See how the larger the investment round is the higher the expectations are?
Have you ever raised a Series A round? If so, did you notice the increased expectations that came with it?
Please share your thoughts below in the comments so that we can learn from each other.