Failory - A Guide to Raising a Series A Round

Hey — It's Nico.

In the past weeks, I published two guides about how to raise Pre-Seed and Seed funding. This week, I'm bringing you a guide to raising a Series A round.

🙌 Welcome to the 418 founders who joined this week.

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What is Series A Funding? Series A financing refers to an investment in a private startup company after it raises a seed and pre-seed round.

If you're raising a Series A, it means you've iterated a lot on your product/service and business model. The result should be PMF and a demonstrated potential to penetrate the rest of the market.

What is Series A Funding used for? Basically for three things:

1. Creating internal cultural and management processes with the help of your board so as to prepare your startup for hypergrowth.
2. Expanding your sales & marketing teams to find different repeatable growth playbooks.
3. Iterating on your product by hiring more talented engineers to build new features that different segments of your market might request.

When to raise Series A Capital? You should start raising Series A capital 6-8 months before you've finished deploying the funds from your Seed round.

This timing should give you and your team enough time to pitch to your existing investors and new investors that your startups' traction and trajectory are worthy of a series A level round.

How does Series A Funding work? Most Series A rounds are priced equity financings. In these, investors buy preferred stocks in your company in exchange for their investment.

After you've gone through pitching investors and their due diligence process, you'll receive a formal letter, called term sheet, expressing their interest in investing and their terms. In the guide, we go over the two main terms of term-sheets: economics and control.

How much Series A Funding should you raise? The general rule of thumb is to raise enough money to fund/meet your revenue growth milestones to raise a Series B.

It would be best to collaboratively discuss these growth milestones with your Series A investors to guarantee a future Series B check.

We studied 6,098 Series A rounds and discovered that the average amount raised in a Series A round by US startups is $22,649,065, while $20,581,131 for startups in the rest of the world.

Which was the largest Series A round? The award goes to Didi Freight, the China-based mobility startup. Didi raised a mind-blowing $1.5B series A round in Feb 2021, from a syndicate of investors.

How to raise a Series A round? In the guide, we dive deep into how to prepare for a Series A fundraising, the investment materials you need (pitch decks and data rooms), the process of raising, and the closing of the round.

How long should Series A Funding last? The general piece of advice is that it should last as long as you need to either:

1. Obtain enough market share to be profitable but keep growing at a steady rate without having to raise money again (default-alive).
2. Hit the product and revenue milestones that future Series B investors expect to unlock another potential funding round.

Since building technology is expensive, this usually translates to 14-18 months worth of operating cash flow until you may run out of money.

If you've raised Pre-Seed or Seed rounds, I recommend you read more in detail the article's sections on how Series A funding works and how to raise a Series A round.

​Here's the link to the Series A guide.​

If you haven't raised any funding yet, I recommend you to check our Pre-Seed and Seed guides instead:

• ​Pre-Seed Funding: What It Is, How It Works & 7 Sources​
• ​A Guide to Raising Seed Funding in 2022​

Besides the Series A article, this week I published two articles that you may find interesting:

• ​The 25 Biggest Failed Google Products​
• ​The 20 Most Successful Shark Tank Products​

Lastly, as every week, here are three recommended resources:

• ​How to Fundraise and Build a Pitch Deck: This week, BaseTemplates launched this great online course ($179) about how to build a compelling pitch deck and raise money from investors.
• ​How to Acquire Customers With TikTok Ads: A playbook with several strategies to acquire customers with TikTok ads. It explains how to make A+ ad creatives, source content creators, structure your ad account, and launch your first campaign.
• ​Productizing MicroAngel Returns: For the last 15 months, Eyal has been building and growing a Micro PE fund. In this article, he proposes a way he could create a similar fund, without having to get involved in the businesses’ operations.

Hope you've enjoyed this week's newsletter ;)

Cheers,

Nico