The Art of Startup Fundraising: Pitching Investors, Negotiating the Deal, and Everything Else Entrepreneurs Need to Know by Alejandro Cremades

Author:Alejandro Cremades
Language: eng
Format: mobi, pdf
ISBN: 9781119191834
Publisher: Wiley
Published: 2016-03-30T14:00:00+00:00

Series A Round

We now come to the “series” of investment rounds. Each of these rounds serves a different function, but series A is often difficult to define, because the term is used interchangeably with preliminary and seed rounds. Here, however, we will discuss the Series A investment round as a distinct round with its own goals, investors, and advantages. Again, while some of these terms overlap, it's essential that you as a startup founder are aware of each so that you can more effectively negotiate with investors, showing that you are knowledgeable.

What Are the Aims of Series A Investment?

Series A investment is often the first investment round a startup founder will encounter in which institutional investors participate. However, even if your business has required seed investment or preliminary investment of some kind, you may still find investors referring to the following investment round as “Series A.” This is often the first major form of investment a startup will secure.

As the name implies, this investment round is often followed by others, and so, just like preliminary rounds, it is not usually considered as the last investment round a startup will require, but it's the stage of investment that will allow your company to launch its product/service.

This form of investment is often given through preferred stock, which is a form of fixed dividend given to investors, which provides them with a priority over subsequent investors. This means that if there are acquisition holders of preferred stock, they will be able to sell their shares before common stockholders.

This may not be so important in the event the company does a good exit over the last round's valuation. However, in the event the company is sold for an amount that is below the valuation in which investors invested, then preferred stock is particularly important as they might be able to recover some of their losses while common stockholders may be left holding the bag.

The four goals for this stage of investment include:

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