Rounds

Stages of financing of a corporation, or any concerted attempt to business raise capital through investment. The first round of financing is the initial raising of outside capital, sometimes referred to as “A Series” or “A Round” financing. Investors at this stage are generally venture capitalists and private equity investors. Note that this stage of funding isn’t necessarily the very beginning of fundraising. In many cases, company founders start their business with personal capital and funds offered by family and friends. Formal rounds of financing might begin when the company needs one million dollars or more to truly take the business to the next level.

Later rounds of financing typically attract institutional investors. There are, of course, tradeoffs regarding when an investor decides to get involved with a company. As an early/initial investor, you take on more risk that the company could fold and your investment could be lost. However, you also enjoy perks such as convertible preferred stock and perhaps shareholder voting rights, depending on your level of investment. As a late-round financer, your investment is more secure but generally comes with fewer perks.

 

EXAMPLE:

A transportation industry startup needed to raise two million dollars in its A Round financing. Venture capitalists who got in on the ground floor were able to influence company decisions through shareholder votes. The company held new rounds of financing once per year, and although more investors signed on, they received only common stock.