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Startup Funding Rounds-Series A, B, C… Explained (With Examples)

Startup Funding Rounds - Founder360


Startup Funding Rounds-Series A, B, C… Explained (With Examples)

As a startup founder, it is essential to be cognizant of technical terms that come up when raising funds or simply engaging an investor. One important term to know is “funding round” which basically refers to the stages in funding a startup will go through to raise capital.

These funding rounds are usually divided into different stages depending on the growth trajectory of the company.  This growth trajectory would more so inform the valuation a startup has when negotiating with an investor.

There are generally two stages, i.e. early-stage investing where the funding is mostly used to fund the foundation of a company, develop the products and boost early expansion; and late-stage investing where the funding is used to accelerate expansion and scope of operation.

Below is an overview of each funding round:

Early-Stage Rounds

Pre-Seed Funding

This is the earliest stage of funding and barely gets included among the funding rounds.

At this stage, the founders are mostly developing a prototype or proof-of-concept and such funding usually comes from the founders themselves, as well as their families, close friends, and/or an angel investor or an incubator; it is usually a low amount.

A case example is when Trella, a Cairo-based B2B trucking marketplace that connects shippers with carriers raised US$600k+ in a pre-seed funding round led by Algebra Ventures, with participation from strategic investors, global VCs, and notable angel investors including Esther Dyson and Jambu Palaniappan.

Seed Funding

This is usually the first documented round in funding. It is also an important round as it allows the startup to lay the foundation in launching the product to the market.

Seed funding helps a company finance its product development, market research and team expansion beyond the founders. While this stage is still emergent, it is usually based on speculation hoping that the funding will spur the startup into full existence. The need for seed funding and the amount will also depend on the startup’s valuation.

Seed funders will typically include family and friends, incubators, angel investors and early-stage venture capital firms and institutions like Microtraction and Y-Combinator.

A case example is when 54gene (the D.B.A. of Stack Diagnostics), an African-focused healthtech genomics and AI startup raised a US$4.5M seed round from Y Combinator, Fifty Years, Better Ventures, KdT Ventures, Hack VC and Techammer, among others.

The early-stage investment will allow the six-month-old start-up to pioneer and build the world’s first African DNA biobank, install electronic data capture systems in the leading tertiary hospitals in Nigeria and expand its world-class teams both in the US and Nigeria, ahead of the company’s expansion plans on the continent.

Series A Funding

At this level, the startup has already had some traction in terms of the user base, revenues, or some factors on set key performance indicators. It is usually considered especially when the startup seed-stage did not include outside funding.

Funding at this stage will be mostly required to increase revenue by launching a new product/service or implementing a new plan.

Most Series A rounds and the subsequent ones usually have a lead investor who acts as the anchor and leads other onboarding investors.

Investors at this stage are more concerned with the strategy the company is employing in generating more revenue in the long-term. Funding will primarily come from traditional venture firms and with minimal angel investor activities. These firms include TLcom, Wamda Capital and Goodwell Investments.

A case example is when Twiga Foods, a Kenyan business-to-business food supply platform raising US$10.3 million in a Series A funding round through debt and equity instruments.

Wamda Capital was the anchor investor supported by Omidyar Network, DOB Equity, Uqalo, 1776, Blue Haven Initiative, Alpha Mundi, and AHL.

With the new funding, Twiga will be able to increase the number of vendors it’s able to serve each day in Nairobi, diversify its product portfolio and introduce advanced supplier services.

Read: The 5 Most Notable African Startup Acquisitions of 2019

Series B Funding

At this stage, the company is in full growth mode with successful products and service, increased customer base and revenue.

Funding at this stage will mostly be used to scale the company into either a new region or acquire another smaller business. The startup will also need to hire and expand its team in order to be competitive.

Series B funding will usually come from traditional venture capital firms which might include the earlier investors and private equity firms.

A case example is when Nigerian digital payments startup Paga raising US$10 million Series B2 from the Global Innovation Fund to facilitate its international expansion. The firm was raising the capital to expand its payment solutions to Ethiopia, Mexico, and the Philippines.

Startup Life Cycle - Founder360

Startup Life Cycle | Image Credits: EBAN

Late-Stage Rounds

Series C Funding

Companies that engage in funding at this level are well-established businesses that might be looking to venture into continental or international markets, create new products or acquire other competing businesses.

Series C stage is often the last round a company engages in before going public or for it to be acquired; ideally to increase its valuation. Investors at this stage are mostly private equity firms and late-stage venture capital firms.

At this stage, the amount is usually US$10 million +.

A case example is when Cellulant, a leading digital payment solution headquartered in Kenya with operations across 11 African countries raised US$47.5 million in its Series C round from TPG’s Rise Fund alongside Endeavor Catalyst and Satya Capital.

The new capital will be used to broaden their reach and extend their payment services across the continent.

Series D, E, F

Not many startups will reach Series D and beyond. A company at this stage is either on a final push before going public or they have not met the desired expectations.


The key thing is to be able to understand the difference in the distinct rounds to help you navigate the funding process.

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