Demystifying Investing: Understanding Funding Stages

By Hardik Desai

2.5 minute read

Most companies go through several funding rounds in their journey. Different business models and industries require different capital structures. In this episode of Demystifying Investing, let’s talk about what are some of these stages and how you can navigate them effectively.



In the venture capital world you would often see capital getting raised by the following stages:

  • Pre-Seed
  • Seed and Seed Plus
  • Series A
  • Series B and beyond

And typically, the capital raised by stage would be Pre-Seed – $500k

  • Seed and Seed Plus – $2M-$3M
  • Series A – $5M-$7M
  • Series B and beyond – $10M

These are just general guidelines – ultimately, it boils down to how much capital you need to reach a meaningful inflection point – achieve product-market fit, demonstrate technical feasibility, etc.

In most cases, companies are raising capital every 18-24 months until they get to profitability or a significant inflection point such as $10M+ in revenues, FDA approval, etc., depending upon the specifics of your industry. This is because, in the Venture world, it is rare for companies to reach these growth milestones rapidly purely through revenues. If you can achieve growth through revenues without raising significant outside capital, that’s great. and if not, then as a founder/CEO, you also need to decide whether you want to pursue a high-growth business or if you are ok with focusing on profitability and growing incrementally through profits. There are no right or wrong approaches to growth. Ultimately, you need to be comfortable with the best approach that works for you.

If you believe that you need to raise capital to grow, then at each stage, the goal is to de-risk investment for the next round investor so that you can increase value and raise the next round at a higher valuation.

You should plan for an 18-month runway (unless you are raising a bridge round) – that is generally a minimum amount of time you will need to demonstrate traction and leave sufficient time for follow-on funding.

To sum it up, I would encourage you to evaluate where you are at this point in your startup journey and create a plan to raise capital at the appropriate stages, while ensuring you have an 18-month runway at each stage.

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About the Author: Hardik Desai

Hardik connects early-stage technology companies with entrepreneurial resources in Northeast Ohio and performs due diligence on companies seeking capital from funds managed by JumpStart.