The Simple Guide to the Size and Timing of Investment Rounds

1 July 2022

Liubomyr Sirskyi

Content Manager

You may create the best business idea for a tech startup that can change the world forever, but it cannot be realised without the proper financing. Sometimes, you might spend all your budget before your IT company ever gains momentum. Thus, you should learn more about financing and make well-informed decisions. Here’s our guide to the size and timing of all startup funding rounds. 

Pre-Seed Round

It is quite a new investment stage that has emerged over the past decade. Pre-seed is not considered a traditional company funding round, and many people give up on it, but it is worth reviewing this element of the funding cycle. 

During the pre-seed round, founders create an idea for the future product. In most cases, you have to hold a mockup or even a minimum viable product (MVP) showing the software features. However, you can also attract investments to develop the minimum viable product. 

Your main task is to prove your reliability as a founder to attract initial investments from friends and family, angel investors, or accelerators

What Is the Medium Pre-seed Financing Amount?

The size of the first funding stage varies from business to business. According to DocSend’s report, the average pre-seed financing amount ranges from $400,000 to $500,000. The final number depends on the specific business requirements, so you should weigh them properly before starting the startup fundraising process. 

What Is the Standard Pre-seed Round Duration?

In most cases, this stage is planned for 12 months, but we advise keeping the buffer of 3-6 months. This duration sets realistic expectations and allows you to reach your initial goals. 

Seed Round

It is the primary traditional stage for many companies if they have not organised the pre-seed stage. In this case, you expect to move from a rough idea to full-fledged software development. Therefore, you need to provide potential investors with a functional digital product.

Most businesses end their way at the seed round for various reasons. On the one hand, they may fold if they cannot reach their critical objectives before funds run out. But on the other hand, some companies may collect a sufficient sum to ensure stable project development and stop the funding process. 

What Is the Medium Seed Financing Amount?

The average amount of seed financing varies from $50,000 to $10 million. In 2021, the median seed financing was around $4,5 million. In exchange, investors get stocks in the range of 10% – 25%.

What is The Standard Seed Round Duration?

Generally, the seed stage takes from six to eighteen months. Once a founder gets enough funds, they may stop attracting investments or move further. Sometimes, a promising startup creator may gather seed capital in weeks. 

It is challenging to look for a niche to put the money on, and people find themselves distracted at times. Find out more about the most promising industries to invest in here

Series A Round

This stage allows people to invest in a company with a specific capitalisation. In turn, they get preferred stock, creating mutually advantageous relations for the business and potential stockholders. Preparing for this financing round, you should create a plan for developing your business model and increasing income. 

What Is the Medium Series A Financing Amount?

Generally, the average startup raises from $2 to $15 million, but this amount will increase in the future due to the growth of unicorns (young companies with a market capitalisation of $1 billion and more). The median Series A funding is around $21.8 million (according to the Storm2 report).

What Is the Standard Series A Duration?

This investment round takes from six months to two years. Once this stage has been completed, the company will have enough funds for further project development. From that point, startups may start their entire market presence or progress in investment attraction. 

Remember that you have to create your plan for how much financing you expect to attract during the Series A stage. Set your goals clearly to show your expected roadmap throughout the software launch. 

Series B Round

Once you have proved your company’s reliability and set up a digital product, you may need to collect Series B funds. The second startup investment series aims to attract the attention of a broader range of investors interested in stable projects. Entrepreneurs, individuals, and other companies expect to get stocks after putting money into your business. Therefore, companies that reach the Series B stage are more promising than those that stopped at the initial stages. 

What Is the Medium Series B Financing Amount?

The average company raises around $33 million, while the median financing is $26 million. As for the valuation, the minimum figure is $30 million, and the maximum is $60 million. 

Venture capitalist firms that invested during the Series A round and the new VCs provide this amount of financing. Since the businesses update their valuation at each financing stage, some investors may reinvest to keep their power within the project. 

What Is the Standard Series B Duration?

As for now, founders may collect Series B in a month. However, you should set up to six months to ensure attracting a considerable amount of investments. 

When looking for the right people or companies to fund your project, you should keep a stable cash position and demonstrate continuous business growth. It shows that your company is performing well now and will do so in the future. But if you need to collect more funds to expand your activities, consider further stages. 

Series C Round

The last traditional financing round involves VCs, hedge funds, entrepreneurs and others who have already invested in your company. All businesses that reach Series C are no longer “startups” since they proved their business model. In this case, founders need to gather funding to reach new markets, extend their feature selection or even acquire promising startups. 

What Is the Medium Series C Financing Amount?

On average, a Series C company attracts around $59 million. The latest Fundz report shows that the median pre-money valuation for businesses was around $68 million in 2021. However, some companies may have higher figures looking for Series C financing. 

What Is the Standard Series C Duration?

As your company nearly reached its peak, the time to gather investments varies. One project may attract a nine-figure sum in a matter of weeks, while others wait three months to collect a $10 million amount. At the Series C stage, each company holds a significant percentage of the market and strives to expand even further.

What’s Next?

After the Series C stage, businesses may meet one of the following conditions:

  • Your company generates enough income to keep its sustainability without more startup investment rounds.
  • You have had to quit.
  • You were unable to reach your objectives set during previous stages.

If you need to collect even more money, it may be better to organise the following investment stages. Thus, about 5% of young businesses process to Series D and other rounds

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