A venture round is a type of funding round used for venture capital financing, by which startup companies obtain investment, generally from venture capitalists and other institutional investors. The availability of venture funding is among the primary stimuli for the development of new companies and technologies.
Series A Funding
Series A Preferred Stock is the first round of stock offered during the seed or early stage round by a portfolio company to the venture capitalist. Series A preferred stock is convertible into ordinary shares in certain cases such as an Initial Public Offer or the sale of the company. Series A rounds are a critical stage in the funding of new companies.
A typical Series A round is in the range of $2 million to $10 million, purchases 20% to 40% of the company, and is intended to capitalize the company for 6 months to 2 years as the company develops its products, performs initial marketing and branding, hires its initial employees, and otherwise undertakes early stage business operations.
Jobberman is one company that fits this shoe. Because there are no public exchanges listing their securities, private companies meet venture capital firms and other private equity investors in several ways, including warm referrals from the investors’ trusted sources and other business contacts; investor conferences and symposia; and summits where companies pitch directly to investor groups in face-to-face meetings.
Smaller investment amounts are not worth the legal and financial expense, the burden on a company of adjusting its capital structure to serve new investors, and the analysis and due diligence on the part of institutional investors. A company that needs money for operations but is not yet ready for venture capital will typically seek angel capital. Larger amounts are usually unwarranted given the cost of business in fields such as software, data services, telecommunications, and so on.
However, there are routinely Series A rounds in excess of $10 million in fields such as pharmaceuticals, semiconductors, and real estate development. There are many Series A rounds in other business contexts, underwritten by investment banks, corporate investors, angel investors, public agencies, and others, that do not often receive press coverage. They all share a similar legal and financial framework, but specific terminology, deal terms, and investment practices vary according to business customs within different countries, business sectors, investor communities, and geographical regions.
Series B Funding
Because the company will generally have advanced its business by the time of the B-round financing, it will typically have a higher valuation by this time. This means that the Series B investor will usually pay a higher price for investing in the company than the Series A investor. Private equity investors prefer convertible preferred stock to common stock for the various financing rounds because of the special features of preferred stock, such as dividend accrual and anti-dilution, that may not be available in common stock.