A "round" pertains to a specific phase in the financing journey of a company, where it raises investment capital. This capital often originates from private equity investors or venture capital firms. Each round is structured to equip a startup or a growing business with the necessary capital to attain the next key milestone or progress in its business development. Rounds typically include pre-seed, seed, and series rounds (Series A, Series B, Series C, etc.), with each round potentially involving distinct investors, terms, and legal structure.
The financing journey typically begins with a pre-seed round. This is an early stage of funding, often informally sourced from the founders themselves, friends, family, or angel investors, aimed at getting the business off the ground.
This is followed by the seed round, the first formal stage of funding, where investors provide capital to the founders to validate their business concept and possibly develop a prototype or kick-start initial operations.
Series A, B, C, and so on represent subsequent stages in which a company may raise more capital as it continues to grow and scale its operations. Each round typically involves a lead investor who invests the most capital and has a significant influence on the terms of the investment deal.
As a company progresses through these rounds, its valuation is expected to increase. While each funding round dilutes the equity of the earlier investors and founders, the anticipated growth in the company's value should offer compensation for this dilution.
