What are the Startup Funding Series Stages and How does it Matter for Product Managers?

A product manager’s job can vary from the early stages of a business to the expansion stage. 

Additionally, while starting a product management role, understanding the startup stage will help you set realistic objectives.

Product managers frequently look for possibilities where they are, despite each function being distinct. 

They are either identifying the next development lever or making a discovery. Let’s explore further what these funding stages are.

Different Types of Funding Stages

1. Pre-seed Funding

This crucial seed funding phase occurs so early that it is not even considered a startup investment. 

Pre-seed funding often refers to a startup’s development phase when operations are just starting.

During the pre-seed stage, sponsors will likely not contribute in return for startup equity. 

This stage could persist for a while, or you might quickly receive pre-seed financing. 

It relies on the specifics of your firm and the first expenses you had to take into account when creating the business model.

Bootstrapping is a term used to describe the pre-seed investment phase. Simply put, it refers to scaling your startup with the resources you already have on hand.

New entrepreneurs put their own money into the business and work to expand it as much as they can.

They might have to work extra or find a second job throughout the startup’s growth phase to fund their venture.

Sources of Pre-seed Funding:

• Friends and family
• Incubators
• Startup owners

Value: $10,000 – $100,000

2. Seed Funding

Seed funding comes up next in the process. 

This stage, referred to as the “institutional angel” investment, will probably be the first official early-stage capital your business secures. 

The “seed” is the initial funding necessary to expand your business.

By investing in the company, buyers are taking a significant risk. Startups are required to give investors equity in exchange for seed investment. 

Because entrepreneurs cannot yet ensure a profitable business model, the risks are significantly higher.

In recent years, emerging businesses have increasingly begun seeing the clear benefits of devoting more time and consideration to seed capital. 

This strategy is a sound investment to many founders. 

This is because there is minimal opportunity for discussion when a startup advances to the Series A investment stage to bring in pertinent, qualified, and professional investors who could help direct the company’s development.

Sources of Seed Funding:

• Friends and family
• Angel investors
• Crowdfunding
• Early-stage venture funds

Value: $3 million – $6 million

Raise: $50,000 – $3 million

3. Series A Funding

Your business must have a finished product and a clientele that generates steady money.

It’s time for you to choose series A funding and improve your value propositions. Startups can scale across several markets because of this excellent potential.

It’s essential to have a strategy in place for the Series A investment round that will lead to long-term financial success. 

Startups frequently have brilliant concepts that can attract many devoted consumers, but they lack the long-term monetization skills to make them profitable.

At this point, you need to start becoming familiar with the fundraising process and develop relationships with angel investors and venture capitalists. 

Pro tip: Follow the 30-10-2 rule, and find investors interested in funding your firm. 

This rule says that you need to locate 30 investors that are willing to fund your company. 10 of those 30 investors may be interested in your concept, and 2 will give you money.

Sources of Seed Funding:

• Super angel investors
• Accelerators
• Venture capitalists

Value: $10 million – $30 million

Raise: $15 million

4. Series B Funding

Startups that have gone through the earlier funding phases (seed funding and Series A) have already built up a sizable user base and a consistent income stream. 

They have shown their funders that they can be successful on a much broader scale.

By funding their efforts to reach a broader market, grow their market share, and create operational teams for things like marketing, business development, and customer success, investors help startups broaden their scope. 

Startups might expand during the series B investment stage to expand their customer base and engage in markets with high levels of competition.

Regarding protocols and important players, the series B fundraising stage may resemble the earlier funding stage. 

Nevertheless, the series B funding stage is frequently led by the same individuals, including a vital anchor investor who contributes to luring further investors. 

The primary distinction is the emergence of a new generation of venture capitalists (VCs) that focus on funding well-established firms for them to continue to outperform expectations.

Sources of Seed Funding:

• Venture capitalists
• Late Venture capitalists

Value: $30 million – $60 million

Raise: $30 million

5. Series C Funding

Startups that receive series C funding should already be moving forward. 

These firms look for more money that might enable them to develop new goods, expand markets, or even buy out other struggling startups in the same sector.

Investors are happy to support profitable firms throughout the series C investment stage. They expect to make a profit that exceeds their initial investment. 

The startup’s quick scaling is the primary goal of the Series C fundraising stage.

With Series C capital, you can buy more startups to scale your own rapidly. As more investors enter the picture, your startup activities have grown less hazardous. 

During the Series C stage, numerous hedge funds, investment banks, private equity firms, etc., will gladly invest in your startup.

The startup has already demonstrated that it is a successful business. 

New investors enter the market by making substantial investments in successful firms to establish themselves as top investors.

Sources of Seed Funding:

• Banks
• Private equity funds
• Late-stage VCs
• Hedge funds

Value: $100 million – $120 million

Raise: $50 million

6. Series D Funding

Few startups see the need to get to this level. The Series D investment level enables business owners to raise money for a unique circumstance. 

For example, a merger and if the company hasn’t yet achieved its growth objective. 

If you are exploring a merger with a rival on fair terms but hasn’t yet gone public, series D capital may be an option. 

The Series D funding provides entrepreneurs with the most practical options, enabling them to address problems head-on by merging with another startup.

Additionally, if a firm needs extra money through series D fundraising to stay afloat since series C funding was insufficient to help it reach its growth milestone.

Sources of Seed Funding:

• Banks
• Private equity funds
• Late-stage VCs
• Hedge funds

Value: $150 million – $300 million

Raise: $100 million

7. Initial Public Offering (IPO)

An initial public offering is when a private firm offers its first equity to the general public (IPO). 

A business’s ownership changes from private to the public through an IPO. Because of this, the IPO procedure is occasionally known as “going public.”

Whether a company is brand-new or has been operating for years, it might choose to go public through an IPO. 

Business insiders may use an IPO to broaden their assets or generate liquidity by auctioning all or a portion of their private shares as part of the public offering. 

They usually issue an IPO to find investors to pay off liabilities, fund growth initiatives, increase their public profile, or any of these purposes.

Benefits of an IPO

1. Entry to Risk Capital

It will be challenging for most businesses to attract large investors and venture capitalists as equity investors. It’s not only that there aren’t enough investors. 

They can be accessible but might not be eager to value the entrepreneurial business fairly. 

In these circumstances, it might be wise to look for equity investment from the general public, who could be ready to give the company a higher valuation.

2. Benefits Public Image

Once an organization is publicly listed, its reputation among the general public improves. Customers and suppliers give it more respect. 

Additionally, it gets simpler to draw in businesses. Further, banks will be more eager to lend to publicly traded corporations than privately held businesses.

3. Initiates Mergers and Acquisitions

Mergers and acquisitions are much simpler to carry out for a firm that is publicly traded. The procedures become easier, and the market primarily determines valuations. 

As a result, value is no longer a significant problem.

4. Direct Shareholder Value

Before, startups had no method to monitor the daily changes in the worth of their business. 

A publicly traded company has a stock price that fluctuates during the trading day and represents the firm’s value. 

The business owner must ensure that corporate actions and performance always work to increase shareholder value.

5. Division of Corporate Control

The startup owner’s desires and preferences can no longer be used to run the business. A board of directors will now exist and answer to the general investors. 

The priorities of the shareholders must always come first in the management of the business.

Product Managers and Funding Stages

To get things going in early-stage startups, the founder or founders frequently switch jobs, including taking on the position of a Product Manager, before more help arrives. 

After hiring a professional product manager, things become more relaxed.

As a product manager having a product management tool like Chisel that comes with all the necessary tools you need to juggle the product, is a MUST. 

From creating product roadmaps, building team alignment, collecting customer feedback to eventually building great products, is all that Chisel comes with and much more. 

Creating that initial product and making it profitable might require the product manager to do whatever is necessary. 

Furthermore, it might occasionally be challenging to tell this one product apart from the company as a whole.

Early-stage project managers have tough challenges; thus, being figuratively agile will be beneficial.

Initial firms sometimes take their time hiring, which may cause voids between various jobs on the team. 

It’s better if the PM fills in the blanks to guarantee the product’s performance. This is not the time to only think about the things on your JD.

Creating a successful product at any startup stage is a demanding task. 

Over the three critical phases of formation, verification, and growth, product managers must adjust to new problems.

It significantly impacts the client, the product, and the product manager’s career when they rise to the challenge with a growth mentality at every point of the company’s journey.

Conclusion

At any point of an entrepreneurial journey, businesses can scale their startup’s thanks to the numerous startup funding stages. 

Through this scaling process, they may determine where their startup is and which possible investors would support their growth.

Remember that startups must be established enough to be eligible for a particular investment round to receive money. Your startup’s net value can tell you where it stands in the market.

That’s it for today! If you’re a product manager and need guidance in scaling your company, try Chisel’s free forever today!