When it comes to fundraising, there are different mechanisms to raise capital as well as different type of rounds, each with their own characteristics, goals, and requirements. Having clarity on your options and approach will allow you to communicate and negotiate more effectively with investors and ensure that you are reaching the right audience when opening your round.
In some cases, a startup may need to raise funding even before the Seed round to help build a prototype, develop an initial business plan, or build a team. Pre-seed rounds are usually funded by angel investors, friends and family, and can range from $25k to $500k in size. The expected monthly recurring revenue (MRR) or annual recurring revenue (ARR) for a pre-seed stage startup may be negligible or in the low thousands.
Typically the first stage of fundraising, in order to validate a product or service and create a solid foundation for the startup to grow. Usually funded by angel investors and/or VCs, with a round size ranging from $500k to $3 million. The expected MRR or ARR may be in the tens of thousands or low hundreds of thousands.
Following the Seed round, Series A rounds are raised to accelerate the growth of a startup that has established a solid product-market fit and is ready to scale its business. Usually funded by VCs, family offices, and strategic investors. Round sizes can range from $3 million to $15 million, and the expected MRR or ARR may be in the hundreds of thousands to millions.
Raised to scale a startup's business, expand its team, and capture a larger market share. Usually funded by VCs, private equity firms, and corporate investors. Round sizes can range from $10 million to $50 million, and the expected MRR or ARR may be in the millions.
Raised to further accelerate a startup's growth, expand its market reach, and prepare for an IPO or acquisition. Usually funded by VCs, private equity firms, and institutional investors. Round sizes can range from $50 million to $200 million+, and the expected MRR or ARR may be in the tens of millions.
Fundraising can be a critical step in securing the capital needed to grow and succeed. There are a variety of options available, each with its own advantages and disadvantages.
It is important to carefully consider which investment mechanism is the best fit for your specific needs and goals, as well as seek the advice of legal and financial professionals to ensure compliance with relevant regulations and to structure the fundraising in a way that aligns with the company's long-term vision.
Traditional form of startup investment, where investors receive equity (ownership) in exchange of an investment or the right to purchase equity at a later point in time; typically at the next priced round.
For crypto native startups where issuing tokens is a vital component to securing or utilising the protocol, investors receive tokens in exchange for their investment; typically with cliff and vesting periods, as well as TGE unlock amount.
A combination of the best parts of a SAFE and a SAFT. It is a SAFE agreement where investors can convert their investment into tokens at a predetermined price in the future, effectively creating a token warrant.