Series A, B, C

The journey of a startup starts with a very minimal capital acquired from oneself, friends and families. Basically it is a pre-seed funding. Thereafter comes the seed funding round. It is like nurturing a plant. On an average a startup gets $10,000 – $2 Mn with an average valuation of $7.5 Mn.

Only 10% of startup make it to series A round. By the time the company has developed its Minimum Viable Product(MVP). The average series A funding is $12.5 Mn as of 2020, with an average valuation of $22 Mn. Getting to series A funding is a herculean task. You got to show some achievements to the investors. The investors look for the business model thoroughly and the management.

A startup with bad management and great idea won’t progress much. Similarly a startup with great management and an average idea may end up expanding exponentially.

Thereafter, comes series B, the time when you need to expand your product to newer markets. You invest more in research and development to come up with newer products. Then comes the last round series C, where you look to acquire other startups and merge with other startups. There can be series D, E and further rounds of investment.

Each of the startups hanker after investors for money. Most of the startups fail to generate revenue of their own. They burn cash to generate revenue. It take humongous time to reach profitability. Even most of startups fail, and the investors are will aware of it. Still, they continue to invest as you don’t have to correct all the time. A strike rate of 10% will cover up all the loses and turn the VC firm profitable. Moreover, most of VC’s end up destroying the startups.

To put in Vinod Khosla’s word, “Maybe some percentage that’s substantially larger than 95 percent of VCs add zero value. I would bet that 70-80 percent add negative value to a startup in their advising”

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