Failory - 6 Stages of VC

Hey — It's Nico.

In November, I'm publishing articles related to Venture Capital. This week, a guide on the stages of VC: Pre-Seed, Seed, Series A, Series B, Expansion, and Mezzanine.

🙌 Welcome to the 526 founders who joined this week.

This issue is brought to you by The Human Future Journal:

The future doesn't need to be bleak. This newsletter explores the technologies creating a more human future.

Every two weeks, we cover specific technological developments that could bring us closer together, foster happiness, and make us more purposeful. From AI that can detect prostate cancer to nuclear fusion, The Human Future Journal covers it all in a fun-to-read package!

Pre-Seed Funding:

• What is it? It’s typically the first round of funding any startup gets in its lifecycle and is a way for a startup in its earliest stages to become a venture-backed company.
• When to raise it? Founders can raise pre-seed capital before they even have an MVP or prototype of their product/service when their business idea is still taking form.
• Average amount: $50,000-$200,000, although it could be significantly less or more.
• Common investors: Founders themselves (self-funding), their friends and family members, angel investors, and startup accelerators/incubators.

Seed Funding:

• What is it? Seed stage funding is the second-earliest stage of the venture capital process and is usually given to startups that are past the conceptual stage or have already received a round of pre-seed funding.
• When to raise it? Ideally, you should already have some prototype or MVP before asking investors for seed stage funding.
• Average amount: Around $500,000.
• Common investors: Angel investors, early-stage VC firms, and startup accelerators.

Series A:

• What is it? Early-stage venture capital provided to startups that already have some level of operational stability.
• When to raise it? After you have a working product on the market and your business operations are somewhat stable. It’s not necessary to be profitable yet, but you should be generating some sort of revenue.
• Average amount: Around $18M.
• Common investors: Well-established VC and private equity firms.

Series B:

• What is it? Typically the last round of early-stage venture capital. It’s a cash injection given to help the business continue scaling after it’s already generating revenue.
• When to raise it? Once you have a mature product, stable business operations, and a steady stream of revenue but need more cash flow to meet large-scale business demands.
• Average amount: $7-$10 million.
• Common investors: Venture capital firms.

Series C (& Beyond):

• What is it? Provided to companies that have outgrown the startup category. It's used to expand operations in a significant way.
• When to raise it? If your company is fully established and profitable and no longer feels like a startup. You should have a mature product and a high level of brand recognition.
• Average amount: Approximately $60M.
• Common investors: Private equity firms, hedge funds, and investment banks.

Mezzanine Financing:

• What is it? A unique type of late-stage venture capital loan. It is a hybrid of debt and equity financing that allows lenders to convert the debt into equity.
• When to raise it? Usually raised to fund special projects, late-stage expansion, or to aid with an acquisition.
• Average amount: $5M-$100M.
• Common investors: The company’s primary, long-term investors or investment banks.

If you're interested in learning more about:

• what are each of these stages
• when to raise each stage
• how to raise in each stage

➡️ The 6 Stages of Venture Capital Funding​

This week I spent some time reading various startup-related resources and selected 3 of the best:

• ​Interview With Outgoing YC President Geoff Ralston: Garry Tan is assuming as YC's President in January. In this interview, the outgoing President shares the reasons why he's leaving and his thoughts on the past, present, and future of YC.
• ​What to Do After You Launch: Nathan Baschez has recently successfully launched LEX, an AI-powered word processor. In this article, Nathan shares what to do after a product's launch.
• ​Managing Remote Teams: In this video, Benji Hyam and Devesh Khanal share the techniques they use to manage their agency's remote team by outcomes rather than by outputs.

Hope you enjoyed this week's article and curated resources ;)

Cheers,

Nico