What Is Series A Funding? Definition & Process

6 min read
What Is Series A Funding? How It Works

Securing the funding you need to turn your startup idea into reality is one of the most important steps you’ll take in your entire entrepreneurial journey. For many people, it’s also one of the most intimidating steps. Whether you’re taking your very first strides along the path of startup financing or you’re already an experienced fundraiser, you might feel like you need some guidance when it comes to securing investments

The Series A round is a crucial milestone along your business’s trajectory that bridges the gap between seed funding and further growth. In this article, we’re going to demystify Series A funding and offer some tips for navigating your series A funding round successfully.

What Is Seed Funding?

Before you can begin to understand Series A funding, you need to be familiar with seed funding as well. Seed funding is usually the first round of funding a startup receives (although it’s becoming more and more common to seek an even earlier, pre-seed funding round). 

At the seed stage, your business is in its earliest days. You are probably still developing and validating your business idea, conducting market research, and possibly working on a mock-up or a prototype. You may be able to get started with only minimal out-of-pocket spending (called bootstrapping), but you’ll ultimately need external funding to complete these crucial initial steps. 

The most common sources to turn to for seed funding are friends and family, angel investors, or specialized incubator or accelerator programs.

Seed stage investors will generally ask for equity in return for their seed investment — usually in the ballpark of 10% - 20%.

What Is Series A Funding?

Now that we’ve covered the basics of seed funding, let’s move on to Series A funding. Series A funding is the second significant step in your company’s funding journey (or possibly third, if you received pre-seed funding). Once you enter the series A stage, you need to have more than just a solid team and some blueprints.

However, that doesn’t mean your business needs to be profitable yet. By the Series A round, you should have a working product, enough customers to provide at least a small amount of revenue, and possibly a few employees — in other words, your business model should be operational, but it’s okay if it’s not yet wildly successful. 

The Series A round is all about demonstrating with tangible traction that your business is actually feasible in practical terms in order to convince investors to commit capital toward its further growth. Series A investments are typically quite a bit larger than seed-stage investments. This is because growth at the Series A stage is usually more expensive, and also because A-stage companies generally represent less risk for investors than seed-stage companies. 

Just like seed investors, series A investors (usually venture capital firms) expect equity in return for their capital. It’s common for the founding team to give up slightly more equity in the A round than in the seed round — typically between 15% and 30% — though the right number varies based on many individual factors.

3 Businesses that Benefited from Series A Funding

It’s extremely common for companies to receive capital from professional investors to help them reach their growth goals. Most (if not all) of the brands you know best and interact with most often built their success on multiple rounds of fundraising — including a Series A round.

Let’s take a look at how three of the world’s most successful companies, Google, Amazon, and Uber, were influenced by their Series A funding rounds.

1. Google

Google's Series A funding was led by Sequoia Capital and Kleiner Perkins, both venture capital firms. In 1999, these firms invested $25 million into Google’s Series A round. This was Google’s most significant investment round, and the $25 million raised is what allowed the company to expand as rapidly and successfully as it did throughout the early 2000s. The rest is history.

2. Amazon

Amazon’s series A round was led by Kleiner Perkins, which injected $8 million into the company in 1996 when it was still an online bookstore. Kleiner Perkins’s investment was the only VC investment into Amazon — the seed round was sourced from Jeff Bezos’ parents. Amazon invested all that money into growth, and within just 3 years, Kleiner Perkins’s investment had already generated returns of approximately 55,000%.

3. Uber

In 2011, Uber raised a Series A round worth $11 million, led by VC firm Benchmark. Though many of the investors Uber approached were initially very skeptical about the startup’s concept (particularly regarding regulatory challenges), Uber took the $11 million investment and used it to scale their meager user base. When Uber went public eight years later, it was one of the largest tech IPOs in history at $8.2 billion.

What to Expect from Investors at the Series A funding stage

It’s very important to understand what investors are looking for at the Series A funding stage. While there are some universal fundraising truths, for the most part, your strategy should depend on the specific stage of the process you’re currently at.

At the seed stage, investor pitches are more about clearly articulating your business idea, demonstrating its market potential, and building confidence in your team. At the Series A stage, however, investors will be looking for real evidence of success — not just potential.

Most importantly, companies that are seeking series A funding need to be able to demonstrate traction. Series A investors want to bet on companies with bright futures, and the best way to show them a bright future is to point to your wins so far. If you don’t yet have signs of traction (like a steadily growing user base or increasing revenue), it may be too early to ask for a Series A investment.

Most Series A investors will be very interested in seeing key performance indicators like market share, revenue projections, and growth metrics. They’ll also expect to see a well-defined growth strategy and hear a clear plan for how you plan to use their investment to scale your business and provide attractive returns.

Investors will also become more interested in your competition at the Series A funding stage. They’ll want to know how your company stacks up against the other major players in your market and what you’ll do to stand out. While assessing the competitive landscape is also a very important part of the seed funding stage, investors will now be paying attention to your actual market share and what you’re doing to improve it — not just projections.

Ultimately, a Series A investment is meant to serve as a gateway between initial success and exponential growth. It’s very important to show Series A investors evidence of that initial success and make it clear how you will use their money to turn early traction into massive long-term gains.

Enhance Your Fundraising Journey with Advice from an Expert

Startup funding is never easy, but it’s crucial for success as an entrepreneur. Whether you’re working on securing Series A funding, seed funding, or any other stage of startup financing, getting advice from an expert can be a great way to improve your odds and bolster your confidence. You can find real fundraising experts who are willing to share their tailored insights to help you reach your fundraising goals faster.

Get 1:1 advice from a fundraising expert

Edvard Engesaeth

Edvard Engesaeth

Co-Founder - Nurx
Telehealth Expert

Union Square Ventures

Dr. Edvard "Eddie" Engeseath, MD is the Co-founder of telehealth startup Nurx, angel investor, startup advisor, and a former family physician. He founded Nurx to make prescription birth control more accessible. The company has since grown into a full-service telehealth startup in the prescription medicine delivery space and is backed by some of the world's most prestigious VCs such as Union Square Ventures, Kleiner Perkins, and Y Combinator, to name a few. Nurx has been featured on Y Combinator's list of 100 most valuable startups several years in a row. Eddie has made appearances on ABC, CBS, and NBC, and has been featured in Scientific American, New York Times, S&P Global, USA Today, and Forbes, among others. An active angel investor, he is passionate about helping entrepreneurs and aspiring founders looking to build great startups that help shape the future.

Founded Nurx
Acq. by Thirty Madison
Raised $100M+
Y Combinator
YC top 20 exit
See pricing & availability
Jacob Jaber

Jacob Jaber

Co-Founder - Philz Coffee
Retail Sales Expert

Philz Coffee

Jacob Jaber is the Co-Founder & Chairman of Philz Coffee. As CEO for nearly two decades, Jacob grew Philz from the original coffee shop in San Francisco's Mission District to more than 70 locations across the country. Jacob has raised more than $100 million in funding from investors. Jacob is also a renowned investor and advisor and was named Forbes' 30 Under 30. Jacob is a pro in the consumer space, specializing in product, design, customer experience, retail, consumer technology, team building, org culture and more.

Philz Coffee
Raised $100M
Angel investor
Retail expansion
Food & Beverage
See pricing & availability
Mercedes Bankston

Mercedes Bankston

Director - The Founder Institute
Business Development Expert

The Founder Institute
Loyal VC

Mercedes Bankston a LinkedIn Top Voice and a dynamic leader serving as Director at the Founder Institute, the world's premier idea-stage accelerator and startup launch program. In this role, she has helped over 1000 start-ups launch, raise capital, and exit. Mercedes is instrumental in helping participants refine their ideas, build strong teams, secure initial customers, and raise the necessary funding. Under her guidance, Founder Institute maintains an impressive portfolio valued at an estimated $20 Billion, a 80% graduate survival rate after five years, and has successfully launched over 3500 companies.

The Founder Institute
Loyal VC
McGraw Hill
NEC Corporation
Funderstar LTD
See pricing & availability