Just like passing the hat at show time, an investment round is a way of raising resources for the development of a business.
Generally linked to the world of startups, this term has its equivalent in the expression “FUNDING ROUND”.
Investment rounds are divided into phases, which take into account the startup's level of maturity.
PHASES OF INVESTMENT ROUNDS:
► Angel Investment;
► Pre-seed;
► Seed;
► Series A;
► Series B;
► Series C onwards.
Angel Investment –
It is usually a form of financing to get ideas off the ground.
These are smaller amounts, generally contributed by individuals: former executives or entrepreneurs who want to be close to businesses in the early stages. In the USA, the check is usually between US$5,000 and US$150,000 and the stake in the business does not exceed 25% (source: Forbes Advisor).
Pre-seed –
It refers to the period in which the founders of a company are starting their work. Pre-seed financiers tend to be the startup founders themselves, as well as people close to them and family members.
Seed –
It is the phase in which a startup receives resources to validate its business idea, assemble the first teams and carry out research and product development.
According to the FUNDZ platform, the check at this stage is usually for up to US$10 million.
Series A investment round –
It happens at the stage when a startup already has a business model built with customers and revenue. Furthermore, it needs to show potential to grow and generate even more income.
The main difference between the Series A round and the initial fundraising stages is the amount of money involved. According to the FUNDZ platform, which consolidates information on investments in startups around the world, the most common is for a Series A investment to be between US$2 million and US$15 million.
On the side of those who finance, they are the Private Equity and Venture Capital funds, which usually finance investment rounds from Series A onwards. These funds usually have a certain amount of resources to invest in companies that meet the funding requirements in their STRATEGY OF INVESTMENTS.
There are, for example, those who invest in companies in the B2B market. Others look only at the technology sector. There are some that mix sectors, which helps with diversification.
There are funds that can enter the Seed Capital phase and remain until the IPO and beyond. On the other hand, other funds need to exit their investment when the company reaches a certain level of growth. In the end, it all depends on the INVESTMENT THESIS, on the fund.
Series B investment round –
Series B investment rounds are for companies to expand their market reach. It is suitable for those who have already managed to implement their own Series A plans and have launched new ways of generating income.
Companies that have moved to this stage have already developed customer bases and proven to investors that they are prepared to work on a larger scale. FUNDZ estimates that the average volume of resources raised during this period is between US$30 million and US$60 million.
The investment funds that participate in a Series B round are generally the same ones that have already invested in Series A, to avoid diluting their stake in the company due to the capital increase. However, again according to each person's INVESTMENT THESIS, there are those who only enter at this stage.
One of the stages in this phase is expansion through mergers and acquisitions: when stratups begin to buy companies to evolve their business.
Investment rounds Series C, D, E, F and G-
There are companies that grow so much that their expansion ends up being financed by several other rounds of investment. UNICORN STARTUPS usually fit this criteria.
The more they grow, the more they attract the attention of new investors and they begin to obtain more financing options. Another important factor is that the risk for investors decreases at this stage, since the business is more consolidated.
Therefore, it is more common to see Hedge Funds and investment banks at this stage.
The Company's exponential appreciation potential and preparation for a possible IPO are the factors that attract interested parties.
Examples of startups in the Series C investment round:
● Alice
● Buser
● Omie
Examples of startups in the Series D round:
● Easily
● LivUP
● Loft
Examples of startups in the Series E round:
● WoodWood
● Fifth Floor
Examples of startups in the Series F round:
● Credits
● Loggi
Examples of startups in the Series G round:
● iFOOD
● Nubank
● Farmer's Business Network
Note that the series of investment rounds have no relation to whether a startup becomes a Unicorn. In this case, the criterion is always for the company's VALUATION to reach US$ 1 billion, regardless of the fundraising phase.
Source:
Published by Redação G2D in Aprendiz (07/02/22)
G2D Investments (G2DI33) – Venture Capital company – shares traded on the stock exchange.
https.://www.g2d-investments.com
Reynaldo Pereira
06/23/22
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