A Series A round is a startup’s second significant round of funding through securities. This round usually occurs in the early phases of a company’s development. In return for the increased risk of their investment, investors that invest in a company’s Series A round of capital frequently get better rates on equity. For various reasons, Series A is usually the most challenging round to finance. As a young company, you’re still going through growing pains. It would help if you kept budgeting intelligently to stretch your Seed investment as far as possible as you figured out new strategies to accelerate your growth. To know more on series fundings, click here.
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Strategies For Series A Round
Some of the strategies are:
Prepare for Series A round
If you’re attempting to raise a Series A, it’s a good idea to familiarise yourself with what venture capitalists look for. This will help you determine if your firm is Series A round ready. Good unit economics, revenue, proof of business model, systems prepared to support efficient scaling, product/market fit, customer acquisition strategy and success, and team quality are some key factors that are generally taken into account.
Moreover, it’s a good idea to assess where your company stands against these metrics. This will help determine if you’re ready for the Series A round.
Start early for your Series A round
In today’s market, fundraising is a time-consuming activity; be realistic about your timeline. Make sure you begin the process at least 7-8 months before you plan to raise a Series A round of funding. The pre-term sheet and post-term sheet are the two components of the transaction procedure.
Furthermore, underestimating the time necessary will almost always result in desperation, and you’ll have to change your fundraising plan to include diverting focus to raise a bridge round to keep the firm afloat.
Building Relationships and Meeting the Right People
In comparison to Series A, seed money is more numerous and quicker to get. It would be simpler for you to acquire possible investor meetings if you use your network and create trusted relationships before starting your Series A campaign. Look for contact with your more comprehensive network and get them to contact their contacts. It’s always beneficial to spread the word about your company through your network or PR/marketing campaigns. The outcomes of these second-degree networks are robust and favorable.
Networking also helps you maintain your ear to the ground. Furthermore, it lets you collect valuable information that may lead you to the proper VCs. Don’t assume that a VC that has previously invested substantially in your sector would do so again.
As soon as you hit the Seed stage, you should start networking and meeting as many people as possible, and developing contacts so that when it comes time to start putting together a list of potential VCs to pursue Series A investment, you’ll already have a solid notion of where to start.
Fundraising is a time-consuming procedure that your company’s management will have to devote a significant amount of effort to. Your leadership is undoubtedly used to being extremely hands-on and involved in every level of your business as a Seed financed or bootstrapped firm. It won’t be achievable if you successfully raise funds for your Series A round.
Because you’ve put together a strong team and supporting cast, your company should be able to attract venture capital companies. If you want to devote your whole focus to fundraising, you’ll need to delegate many of your day-to-day operational tasks to others and, if required, outsource some of your startup’s core procedures to third parties.
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Team Coordination and Internal Communication
Be open and honest with your team about why you’re looking for finance. Additionally, help them understand how you think the investment you’re looking for will affect the company.
You don’t have to go into great depth or give out the names of the VCs you’re considering. However, don’t be afraid to address employee queries on issues that directly affect them.
What Is Your Seed-Funding Timeline?
While timing isn’t a set idea in fundraising, it is crucial. That’s why having a clear notion of your run rate should be a top focus.
You’ll be able to pace your fundraising efforts correctly if you know how much it takes to keep your business running and how long you’ll be able to support your startup with your present level of cash and income.
Rehearse your “Pitch”
The important part is to attend as many meetings as possible. Speak with other startups who have obtained Series A funding and incorporate their suggestions into your pitch. Before meeting with the top priority investors on your list, complete with the low priority investors first.
They will ask you pertinent questions and offer you critical feedback to integrate into your pitch. Treat the rise like a product, and iterate until it’s perfect.
Reduce the time it takes for your deal to close by completing all due diligence paperwork.
Ensure that your company’s legal documents and compliance are up to date. Have your staff gather any records on personnel, previous funding, corporate structure and establishment, client contracts, intellectual property, cap table, and other relevant information.
The paperwork should be prepared and available for the Investor’s legal counsel and due diligence team to evaluate.
Make sure the terms of the agreement are correct
The transaction conditions for your Series A round must be appropriate and consistent with the direction of your company. The Series A terms will serve as a foundation for all subsequent games.
Thus many of the same terms that you signed up for in your Series A are likely to transfer over to other rounds, such as Series B or Series C – so it’s critical to get them right the first time.
Raise 10-15% more than the budgeted amount
If you have access to funds and the deal conditions, including dilution, are acceptable, raise 10-15% more than projected, as company initiatives and operations may not always go as planned. Raise enough money to give you a good chance of meeting your goals for the next round of funding, so you can focus entirely on growing the business and scaling it properly.
Raising every round of investment after the Series A round gets substantially more challenging, which is a time-consuming and tedious process. Additionally, every time you close an extra round, you will incur a transaction fee.
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Hence, these are the few strategies you can use for the Series A round.