Fundraising Stages

Building a startup is hard. As a founder, you are focused on developing your product, hiring talent, and attracting capital. There are a few ways to finance your startup. Most startups use personal or family and friend capital, customer revenue, debt financing, or venture capital to grow their business.

There are multiple stages of startup fundraising: Seed, Series A, Series B, Series C, and so forth. Startups should be mindful about the rounds that they will go through, which are generally based on the current maturity and development of the company. Here’s an overview of the major fundraising stages.

Note that the ranges above are standard. There are many exceptions, especially on the higher end. A second time successful founder can raise at a much higher valuation. A company growing much quicker than the average can often “skip a stage” and have its Series A look like a Series B or its Series B look like a Series C. However, these are general guidelines that should be helpful for most entrepreneurs. Note that there is also an implied growth expectation that you will move from stage to stage in around 18 months.

Each stage of the startup fundraising process operates very similarly, despite the different stages the business might be in. During the process, the company has to be able to establish it’s valuation, and will need to have clear plans for how it is planning to use the money it raises. Each round of funding will also, by necessity, dilute the company’s equity.

Also, the right timing to raise a round varies per company, so there is no fixed time. Some startups are able to raise money quicker than others, but even for strong startups, fundraising is a marathon that requires constant attention for a minimum of 3–6 months, given the current economic climate it may take even longer so best to start sooner rather than later. You may also have to review the amount you need to fundraise for your next round and try to raise more.

Pre-Seed Funding = Idea Stage

At the beginning of the journey, you’re still in the idea stage, and you find yourself in a “Valley of Death”. In this phase, you usually get money from FFF: family, friends, and fools. This period of startup fundraising can be challenging due to the fact that the business model has not yet been proven. Hence, the money from the pre-seed funding helps to design the product, launch an MVP, get early customers, and some level of product and market validation.

Seed Funding = Company Stage 

In the seed funding stage, you look at angel investors and family offices rather than people you know, and these angels invest their own money. Another source would be early-stage VCs. What you do in the seed round is taking little money, to prove your traction in one area. Once you’ve nailed your promise, start looking for more money in order to prove your next steps. In the seed funding round the money helps to bring products to market, sign first contracts, and advertise to the public.

Series A = Product and User Base Optimization

In Series A fundraising, it’s time to aim higher and raise more funds. At this stage, you reach out mainly to VCs, industrial or corporate investors. Unlike angel investors, VCs take other people’s money and then invest in young, risky companies. Finding the right VC for your startup is very important. Apart from capital, they can help you get to the next stage and open up their network to you so it is important to take this into consideration as well. Money raised during Series A usually helps to scale the product, reaching product-market-fit, and introducing new features.

Series B, Series C, and further = Growth Capital and Preparing IPO / Exit

In the Series B round, you most probably raise money that helps hire new team members as well as funding further expansion. As your company grows, in Series C you aim much higher and raise money that usually helps to acquire competitors and pursue further expansion. After you successfully complete as many funding rounds as you need, it’s time to think about the exit. Here you have to choose between selling to one of the big players in the market, or offer the company on the stock market, which is called an IPO (Initial Public Offering). The IPO is just another capital raise, however, this time the investor is neither the angel nor VC. It’s the public. When you go public, people can buy and sell the shares among themselves.  


Fundraising is not an easy walk in the park, it will be challenging. It always takes longer than you think and has more ups and downs than you’d expect.

Go into the process with an attitude that “you’ll be successful”. You need to commit to this process, even though it can be unpredictable and messy.

Fundraising Marketplace Marco Torregrossa

Marco Torregrossa is a private investments advisor for Innovation Manager Finland Ltd. Follow him at @MarcoTorreg