Finding funding for your startup can be daunting, especially considering how high business loan interest rates can be. You can use Series A funding to help you grow your business.
Series A funding can work after you receive your initial seed funding for your business. Your startup will use Series A funds from various groups, including private equity firms.
Working with Series A funding may be more viable than spending too much on business loan interest rates. But be sure when looking at this funding option for your startup that you know what to expect.
What Is Series A Funding?
Series A is the second round of funding you will receive when starting your business. Your work will begin with a seed round where an investor supports your business while receiving an equity stake in your entity. You’ll move on to the Series A stage afterward.
The timing for going from the seed round to Series A will vary. You can expect to spend months or years trying to get there, but it’s all about showing your business can grow and that it’s viable.
A Series A startup will provide preferred stock to investors during this stage. The startup will hold a suitable business model and a plan to attain a long-term profit.
Since a Series A startup has a plan for how it will make money, it becomes easier for groups to invest in that entity. It’s also easier for more massive venture capital firms to support startups when they reach this stage.
But to make this work, you must show you have a suitable business plan open for use. You must express that you’re ready to provide a way to make money and allow your business to become viable. A prospective investor will want to ensure your business can grow to where the potential for the investor to make back one’s funds will be strong.
How Does Series A Funding Work?
Whereas investing in business loans entails receiving funds a startup has to pay back alongside interest payments, Series A funding involves using equity. The startup is selling its shares to investors to receive the money necessary. This measure reduces the need to spend extra money on business loan interest rates and other issues relating to loans.
Here are some steps for how a startup can raise these funds:
- First, the startup has to get through the seed stage and reach some traction. The startup could have a specific amount of revenue or clients ready. There should be some noticeable signs showing a business is ready to keep working.
- The business model should be visible to prospective venture capital investors.
- The investors will then provide funds to the startup in exchange for preferred stock. Preferred stock provides priority access to a company’s assets and higher dividends. A stockholder’s income will be greater than what common stockholders will receive.
How Much Money Goes Into Series A Funding?
Series A funding can entail groups raising anywhere from $2 million to $15 million. The amount suggests investors want to find more than an idea when looking for an investment opportunity. The investor wants to confirm an entity is worthwhile and interesting.
Is This More Affordable Than Business Loan Interest Rates?
Your Series A investment plans can be more viable thanks to how it doesn’t entail highly expensive loans. Since you’re not taking out any loans, you won’t have to bear with any business loan interest rates. The other party providing funds to you will require compensation as your business evolves. Still, you will not be hamstrung in your effort to grow like what you’d experience if you took out an expensive and possibly costly loan. The compensation will also be higher than other shareholders, making Series A investing viable for many parties.
What Do Investors Look For When Funding a Series A Startup?
The top Series A startups are the ones prospective investors find most appealing. Investors often base their decisions on investing in terms of many factors:
- How well a group might have survived concerning market conditions
- The ability of a startup to resist substantial growth or work changes
- How a startup can manage long-term trends and persist in the market
- The potential for a market or industry to grow
- The value perception of what something provides and whether that value can last long enough
How Are You Going to Make Your Series A Startup Funds Work?
You can get funds for your Series A startup, but you’ll have to look at how you will use your funds. There are a few strategies you can use to improve how well your funds work:
Improve Revenue Flows
The funds you earn from Series A funding can help you get products or services out faster while starting presale events. You can bring in added revenue flows, especially since you’re closer to publicizing your assets.
Pricing Optimization
Inflation is causing various things to become more expensive than before. You’ll have to set up more affordable prices that are easier to manage after a while, especially when looking at your target audience’s potential buying power. Your Series A funds can help you organize how you’re pricing different items, helping you maintain a healthy revenue stream while factoring in inflation.
Adjust Business Costs
Your business costs can vary, but they should be easier to manage when you have Series A funds. The funds you receive can boost your work by helping you manage different operations like product development or asset acquisition. Finding ways to boost how well you can keep your business running while improving your potential to bring in future revenue flows will be necessary, especially if you’re not ready to get those new revenue flows running.
Explore Other Growth Measures
You’ll have many additional growth measures to explore when looking for something viable. Growth can entail anything from hiring more people to bringing in new equipment necessary for production and other tasks.
Other Series A Questions:
Why would an investor want to provide Series A funding?
Investors will want to provide funds because they’ll receive preferred voting rights surrounding different company activities. Since these investors have preferred stock, they have more control over what will happen. The higher dividend payments they’ll receive over common stock also help.
Who will provide you with Series A funding?
You can consult various groups to help you find Series A funding. Private equity firms are among the most common Series A investors, although angel investors can also help. Crowdfunding is also helpful, although individual supporters will demand certain returns based on how much they provide. You can reach Wheeler Group for help to see what’s open.
What happens after you receive Series A funding?
You’ll have control over what you can do with your assets after receiving Series A funding. But if your business succeeds and continues to grow, you can move on to receiving Series B funding. Series B funding is less valuable but helps continue the business’ progressive growth. But it may take a while to get there, as Series B funding typically goes to startups with values of at least $30 million or more.
How long does obtaining the funds for your Series A investment takes
Your business can take months or even years to attain the funds it needs. You’ll have to provide enough evidence and proof to potential investors to want to support your group. A thorough business plan and pitch deck will be necessary for your success.
How are people going to value your business before giving you money?
Other parties will analyze your business based on how much money you’ve raised, your current growth rate, your industry, and whatever assets you hold. You may receive a higher valuation if an entity determines your business is worthwhile or valuable, although the terms will vary surrounding where you go for your work.
Consult Us For Further Details
Series A funding will help your business grow after the seed stage. This plan can be useful, as you can find more money without resorting to loans that might include extensive business loan interest rates. But be sure when finding Series A funding that you plan to use the funds while also showing investors what you’ll do with your funds. Our experts at Wheeler Group can help you learn more about how this part of funding and other stages can work.
About Wheeler Group
Wheeler Group has become a go-to partner for entrepreneurs and business owners looking to secure debt capital to fuel business growth. We work closely with our clients to identify and develop a compelling narrative to present to potential lenders. The Wheeler program includes the buildout of a detailed proforma projection model and presentation materials to detail the growth opportunity of our clients. We evaluate our database of over 150 lenders and leverage our banking relationships to facilitate the discussions from original expression to funding. Our team has closed over $16 billion in total transactions, and we provide experienced market analysis throughout the due diligence and negotiation process. Wheeler Group’s team of experienced professionals is dedicated to providing all the necessary expertise to close and fund successful credit facilities.