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Startup Equity Funding Levels, The Basics

The global VC ecosystem continues to churn. Startups across the U.S. raised $18.4 billion across all equity stages, from seed through late stage growth rounds in Q2. Strong mega-deal activity, alongside the $1 billion + valuations reached by nine new VC-backed companies, and heightened corporate activity have contributed to a 27% increase in U.S. venture-backed funding since last quarter.

In response to the current environment, where mega-round activity and unicorn startups continue to reign supreme in the U.S. and across the globe, here are the four funding levels startup founders should master when raising strategic funding:

1. Initial Funding Round: Pre-Seed and Angel Investment Typically in the range of $150,000-$500,000, this funding round is integral to getting a startup off the ground. You’ll want to tap you extended networks for initial, small scale investments — this includes, but is not limited to, friends, family, self funding, and initial angel investments.

What to know: This is the time to get into the habit of implementing standard financial reporting practices, and more importantly, defining the key performance indicators (KPIs) for the business.

2. Seed and Angel Funding Round This is the first serious round of funding, generally $1 million or less, that founders will seek from outside investors (i.e. angel investors and early-stage VCs) to move their startup to the next level.

What to know: This is a high risk/high return level of funding. Investors expect a 5x + return on their investment.

3. Series A Funding Round This funding round generally sits at or above the $3-5 million range, where founders begin pitching to the leading VCs in their respective industries.

What to know: We consider this round of funding the most crucial in the lifecycle of the startup. This is where the business has to progress from the trial-and-error of defining its business model, to a more established structure driven by execution and growth.

4. Series B, C, D... Funding Rounds Future funding rounds will mark at or above the $5-10 million range, and could reach up to $50 million + at later stages. Investors at these levels will begin to include large scale, well established funding institutions who will be looking for increased market share and revenue.

What to know: You will want to use these subsequent investment series very carefully — pay attention to their dilutive impact on existing shareholders and any stringent terms attached with such investments, given their moderate risk/return objectives.

Ready for more? Download your free ebook for a comprehensive look at equity funding and your strategic fundraising checklist.

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