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Our Guide to Raising Capital in the Series A Stage of Your Startup

If you are a new business owner or an ambitious entrepreneur scaling up your startup, there are some crucial things you need to know before you get started. You may already have a great concept for your business, an understanding of the organizational framework, and even found people to fill in the positions at your startup. In fact, you may have already pitched your ideas to friends and family members as well, but what comes next at this point?

After finding a little seed money from those close to you, it is time for the real pitch. But how do you make sure that any investor is interested in investing their hard-earned cash into your business?

This brings you to the next step 𑁋 getting Series A funding. This is the next formal capital raising event for startup businesses. The main purpose of this funding round is to provide significant liquidity and funds to help the company further develop its products and services until the whole operation is ready for launch. 

If you are new to this and are still struggling to grasp the concept of Series A funding, you have reached the right article. Here, you will learn exactly what Series A is and how it will work to help kickstart your business and drive it to success.

Series A Funding: A Non-Technical Guide for Newbies

As a business owner who is looking into getting enough funding to successfully launch their business operations, knowing the ins and outs of how to get investors interested will make a world of difference. Read on to find out how to make the most of your Series A funding round. This article will teach you how you can get the business capital and get your products ready for the launch of your business.

What Exactly Is Series A?

There could be several reasons for your company to require funding even after the initial seed money 𑁋 You could have a minimum value product (MVP) ready to be developed further to build your vision, or you could have an established team, awesome vision, and no product. To help you assemble the missing pieces of the puzzle and build a successful business, you would need to start with Series A funding.

Series A is a type of financing that can be offered to early-stage companies or startups. They typically offer funds in the range between $1 million and $5 million for equity stakes at attractive valuations. Companies with Series A investments face significantly less risk than those without these investments because they have already gained some traction from investors who believe the product. 

Investors only fund businesses when they are optimistic that your startup will succeed in the marketplace. Angels and VC firms put considerable time into researching each company's market potential, team members' skills, product quality/innovation to determine whether or not the investment is worth it. 

If they consider a good return on investment in 5-10 years (or more), they are more likely to come on board. If everything goes well, they may even go a step further to raise additional funds through follow-up rounds like more robust rounds of seed fundings.

When Are Companies Ready for a Series A?

One of the most difficult aspects for entrepreneurs seeking Series A funding is figuring out when to start looking and planning. Every company has different requirements, but some general guidelines can be followed to help better determine your needs. If you are going to raise funds in Series A, plan at least 6-9 months ahead so time won't run short while also giving yourself plenty of opportunities with potential investors.

After the initial seed money is used, your company will be able to start taking shape and get more momentum. Instead of just an idea in your head or a prototype on paper, you'll have something concrete that can move forward with help from investors.

This is when you will be able to pitch the idea on how you can make it into something successful and bring in more funding from interested investors. When this happens, your startup should be ready for Series A investment rounds! 

Generally, if your company has reached the more mature stage of product development, it will be ready to attempt to pitch the product idea to more investors to gain more funds and complete the development of the product.

How Much Money Should Be Raised in a Series A?

Even if actual sales of the products have not yet begun, many expenses will go into the product development stage. Operating expenses like salaries of any employees you may have, utility bills, and general supplies should all be accounted for when you start making the target goal for how much money should be raised in your Series A funding run. You can use the Ledgy Calculator before you begin to take into account all the costs correctly.

The importance of Series A funding round varies significantly because they can generate anywhere from $10,000 to millions for a new company. For some startups, this is all that's needed in order to be successful and never engage in Series B fundraising. Most companies raising these funds are valued at somewhere between 3-6 million but the amounts differ drastically based on how much capital has been raised.

While the amount of money that should be raised in Series A funding is different for each developing company, the business should be able to come up with enough to cover the operational expenses mentioned above. Also, the amount should be able to cover marketing, sales, and the rest of the product development. Efforts should be made to increase product awareness to give the product a higher chance of success once it will be unveiled and sold later on.

The Structure of Series A Rounds

The idea behind Series A rounds is that they're equity funded, so you'll need to offer up some shares in your company for them to invest and fund it. This means you have to be willing to give up part of the ownership over the company when you accept the capital given by the investors. 

However, there are ways to prevent diluting your stakes that much. You may be able to strike a deal with the investors that will involve the issuance of common and preferred shares. Common shareholders have voting rights while preferred shareholders will not. It may be a little challenging to pitch this idea to any potential investors, especially if the company has not yet seen any earnings. 

This is why, before you present the whole concept and business ideas to any potential investors, you must understand how much the business is worth. It is important not to consider how much it may be worth by today’s standards, but to make projections of how much it will be worth after five to ten years, to entice investors to want to grab some shares. 

Take Uber for example𑁋Uber raised $14 Million in Series A funding and turned it into $60 Million post evaluation. Similarly, Doordash raised about $16 Million from investors in their Series A funding and the company has grown multi-folds since then.

Pitching a Series A Capital Raise to Investors

Making the right pitch will answer the need for how to get investors for a small business. There are many things that potential investors need to see in a product before they will be ready to invest in it𑁋financial projections, detailed marketing plans, and specifics about your market size 

Investors want a solid return on their investment. That means you need to have an exit strategy in place as well, one that is firm and clear. They may be willing to invest for the long-term with your company, but they still expect at some point there will be significant returns from it all - especially if they are investing more upfront than after time has passed.

Therefore, the representatives of your company who will be assigned to present the product idea and concept to the investors have to be prepared to answer many different questions. This is to help encourage the investors to put their money into further development of the product or service. 

The representatives need to be able to fully explain how the product works. They will also need to explain how their products are better and more advanced compared to others in their niche and how these products will fit in with the current market. 

In a nutshell, Your company’s representatives need to sell the products to the investors and explain how much more development needs to be done to the prototype, which will generally present more funding.

Finding Investors for Your Series A

The next question you may have is where to find possible investors. The good news is that there may be potential investors everywhere and Beanie & Blazer can play a vital role in connecting you with them.

Series A investors are usually the institutional type, but you may also be able to find independent individuals who may show interest in what your products can offer. If you do not know where to start in your search for possible investors, your best bet is to join Beanie & Blazer’s Test The Waters  program where we connect ambitious entrepreneurs to a community of investors.

Starting your search with your accountant, bookkeeper, or financial advisor will also help you gain knowledge about the people who may be within your circles. These people, with the right pitch, may turn out to be potential investors. Starting your search with professionals you already know will give you an excellent chance of finding your first potential Series A investors. 

Also, you may want to attend certain events that will give you a chance to meet possible investors and enable you to promote your business, especially if the event is a networking and promotional event in your related industry. This will give you a chance to put your business out there and raise more awareness about the new products that you have in development. 

Lastly, you may find Series A investors in the form of companies that may be willing to fund the rest of your product development. These companies may be willing to help you secure part of the needed funding while connecting you to other companies and individuals within their network to help you gain more investors in the process.

Practicing Your Pitch For A Series A Funding Round

Before you walk in with your team for a meeting, make sure to do the following: The first thing an investor looks at is what will be gained from working together. The next step is focussing on how much financial investment they are willing to put forth and then get their final approval before proceeding.

Here are some tips you could use for your pitch prep before the day:

1. Start with what you’ve built and how far you’ve come from the initial seed funding. Investors like to invest in progressive companies that can fetch them good returns in the future.

2. Paint a picture of where the company is headed. The evaluation of the funding does not depend on the current value of your company but on what it can be in the next few years.

3. Prepare a great answer to the question𑁋why should they invest?

4. Explain why and how raising money will help your company get to its goal. 

5. Be concise and well-articulated instead of rambling in circles.

Conclusion

If you think your business is ready for the next level, you will need funds to get everything for this next stage. Take note that each company develops at its own pace, and making sure that your business is ready for the next step is crucial to your success. Part of launching your business is getting your products and services ready to be sold to your end-users. Gaining a complete understanding of Series A funding and how it can equip your business with everything you need to help it grow is the key to making the most of this funding opportunity.

Once you fully grasp the concept and intricacies of these essential funding rounds, you will be able to carry yourself with more confidence, especially when you meet with potential investors. This newfound confidence will help you give the right impression on potential investors and land a deal more easily since you would be aware of what investors are looking for when they put their money into a business.

In just six weeks, Beanie & Blazer’s Test The Waters program can help you prepare and launch a trial investment crowdfunding campaign. We leverage the best practices from dozens of successful investment crowdfunding efforts and hundreds of investor discovery calls to help creators build investable companies.

Consider subscribing to our newsletter to stay up-to-date on investment crowdfunding, creator mindset and cooperative capitalism.

Beanie & Blazer does not provide investment advice and is not a registered investment advisor or broker-dealer. Investing in startups is risky, never invest more than you’re willing to lose.

To read the full disclaimer, click here (https://beanieandblazer.com/disclaimer/)

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