A Startup’s Guide to Raising Series A Venture Capital

Thursday, August 29, 2019

If you’re reading this post, you’re likely a business owner on the quest for more startup funding—you’re not alone in this. In fact, running out of cash is the second most common reason that startups fail. Yet, only 0.05% of startups successfully raise venture capital.

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You might have experienced success with crowdfunding and seed capital: funds from family, friends and assets. And while these early investments can raise tens of thousands of dollars, they’re usually only able to help a startup from ideation to development, which brings us to the next phase in the startup lifecycle: venture capital (VC).

Venture capital explained

In a nutshell, VC is funding given to a startup in exchange for equity in the company. In other words, if you’re a growing startup who’s exhausted funds from crowdfunding, seed rounds and angel investors, you seek out VC investors or firms for funds that will help sustain your startup’s growth and obtain future goals. And unlike the funding acquired in earlier stages, VC funding typically brings in millions of dollars.

VCs and their firms not only provide capital, but also strategic assistance; introductions to potential customers, partners, employees, and more. But VC financing is not that easy to obtain.

As an entrepreneur, you’ll have a greater likelihood of success with investors if you’re better prepared and acquainted with the process and have an understanding of how to navigate the VC ecosystem. Let’s start with Series A.

Series A

Series A is not just another financing round. It’s your first step to entering the major leagues of venture capital—the big bucks. In fact, Series A funding in 2018 was more than $11 million. This leaves many entrepreneurs asking the question, when is my startup ready to raise Series A?

Let’s start with the black and white facts: there are no distinguishing factors that signifying a company is ready to raise Series A. However, some investors look to annual recurring revenue (ARR) to determine if a startup is worthy of their investment(s). Other investors even consider startups with an ARR as low as $600,000 all the way up to $3 million—like we said there’s no hard and fast rule.

Once you’ve decided Series A is your next move, it’s time to find the right VCs, start thinking about your pitch deck and learn how to decode a Series A term sheet. To help you navigate the VC ecosystem, Embroker put together this guide that compares Series A, B and C funding with tips, best practices and need-to-know knowledge that will help you when you’re ready for your first pitch. 

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