Series A funding: guide for startup founders

Series A – it sounds like the working title of a top secret new Netflix drama. But this label for a funding round is very familiar to every startup founder because it’s such a significant milestone for any company.

Series A is the funding round where you raise a significant amount for your startup, often from VCs, to take your company to the next level.

In this post, we explain Series A fundraising, how to raise Series A investment, where to find Series A investors and alternatives ways to raise capital.

Contents

• What is Series A funding?
• How to raise a Series A round
• The legal documents you’ll need for Series A
• Where to find Series A investors
• The top VCs at UK Series A
• What are the alternatives to raising a Series A round?
• Talk to an expert

What is Series A funding?

Before Series A, you might have raised a Bootstrap round with money from friends and family, and then a Pre-Seed round and Seed round with money from angel investors.

For UK companies at Series A, you’ll typically sell 10 to 30% of the company to investors, and raise between £2 million and £10 million depending on what sector you’re in.

To be ready to raise a Series A round in Europe, a start-up almost always has to be generating revenue, usually approaching £1 million a year or more. The goal of the Series A is to raise funds to be able to scale the company: capturing more of the existing market, developing new complementary products or services, and perhaps expanding internationally.

Founders usually aim to raise enough money at Series A to last the company at least 12 months – ideally, aim to raise enough to give yourselves a runway of 2 years. This investment could be spent on hiring more people, developing your products or services, or whatever you need to do to grow the company and make a profit.

After series A, your next funding round will be Series B, followed by Series C and so on.

Occasionally, a company might do a split or tranched round at Series A, for example an ‘A1’ funding round and then ‘A2’ round. These are structured as two rounds close together in time, and at the same or similar valuation. The advantage of doing this is to receive some of the money sooner. (At SeedLegals, you can use our Instant Investment to close your Series A round and then top it up later with further investment.)

A Series A round might also be called Series A fundraising, Series A investment or Series A financing.

How to raise a Series A round

Not every company has the same journey but these are usual steps to raise a Series A funding round:

1. Prepare your pitch 📓
   Create your slide deck so it’s ready to send to potential investors.
   On SeedLegals, you can create a free Pitch page with your company details, fundraising goal, pitch deck, team profiles and more – to share with investors, simply send them the link.
2. Prepare your Term Sheet 📃
   Often, when a VC is interested in investing in your company, they’ll send you their term sheet. However we recommend you prepare your term sheet before you meet investors so you can be ready to send it if they show interest in your pitch.
3. Get a valuation 🧮
   To work out how to price shares in your company, you’ll need an ‘official’ valuation by a qualified person. Ask your accountant for help.
4. Research and approach investors 🪝
   Make space in your diary – this step can be very time-consuming. Get word out that you’re raising and set up meetings with investors.
   See below, Where to find Series A investors
5. Pass the Investment Committee (‘IC’) ✅
   It’s one thing to get your foot in the door. The next step is to work your way up the chain of command (or even better, skip a few steps with a warm intro) and impress the decision- makers. Then it’s time to work on the deal.
6. Negotiate the Term Sheet ⚖️
   It’s unlikely you and potential investors will agree immediately – negotiation is a necessary part of the process to make sure everyone is happy with the deal. When you raise your Series A on SeedLegals, our experts can help by suggesting which deal terms are fair, and which to push back on.
7. Complete investor due diligence 🔐
   At Series A, investors will check every detail carefully. Be ready to work with the due diligence team to share your files and data. With SeedLegals, you can give investors access to your Data Room where you can upload the files they need.
8. Sign the documents ✍️
   When the Term Sheet is agreed, you and your investors will move forward to sign the required legal documents.
9. Receive the money 💸
   After all parties have signed, your investors send you the money. Then you’ve officially closed the round. Congratulations!

The legal documents you’ll need for Series A

The main funding documents you’ll need for your Series A funding round are:

• Term Sheet
• Shareholders Agreement
• Articles of Association
• Disclosure Letter
• Previous Investor Consent
• Preemption Notice
• Board Resolution
• Shareholders Resolution
• SH01 Form

When you raise your Series A on SeedLegals, all these documents are generated automatically and updated dynamically. Sometimes companies need other supporting documents for Series A – when you need extra help, our experts guide you through.

When you and your investors are ready to complete your round, all parties sign online and your documents are stored securely on SeedLegals.

Where to find Series A investors

To raise a Series A round with VCs, first you’ll need to pitch to representatives from venture capital firms and attract their interest. But how do you find VCs to pitch to? Here are the ways startup founders usually meet VCs:

• get referrals from your contacts 📇
  Your existing investors, advisors or customers might be able to put you in touch with VC investors. Also it’s worth asking fellow founders at a similar or later stage to see if you share potential investors.
• go to demo days, pitch events and investor conferences 🍻
  Sign up to pitch at a networking event or competition, or simply attend the event to meet investors over networking drinks.
• make a noise on social media 📣
  Post about your successes, launches and partnerships. Make sure you’re a regular and interesting presence on LinkedIn, Twitter and other communities for investors and startups. If your company has a strong presence and reputation, it’s more likely investors will message you.
• investigate and approach VCs 🕵️
  Use Google or databases like Crunchbase to find VCs which invest in your sector. Take a close look at the VCs criteria to make sure you’re a good fit before you approach them. And it usually isn’t worth approaching a VC firm which has invested in one of your competitors because most prefer not to have competing companies in their portfolio.

Be ready with your elevator pitch – you never know when or where you’ll bump into someone who could become your next investor.

The top VCs at UK Series A

Which are the most successful VCs in the UK? If we’re talking in terms of investing at Series A in companies which go on to become unicorns, Dealroom’s data show these VCs come out on top:

• Index Ventures
  Invests: globally
  Invested in Birdie, Rooser and Revolut
• Accel
  Invests: globally
  Invested in: Deliveroo, Hopin, Monzo
• Octopus Ventures
  Invests: in Europe
  Invested in: ManyPets, Cazoo, Elvie
• Balderton Capital
  Invests: in Europe
  Invested in: CityMapper, Healx, Better Origin
• MMC Ventures
  Invests: deeptech, mostly in UK but also in Europe
  Invested in: YuLife, Masabi, Snowplow
• Hoxton Ventures
  Invests: tech companies in Europe
  Invested in: Darktrace, Deliveroo, Juno
• Local Globe
  Invests: UK startups
  Invested in: CityMapper, Wise, Zoopla

What are the alternatives to raising a Series A round?

A traditional Series A funding round can take from six to nine months from start to finish. But there are alternative ways to raise the financing you need:

• Crowdfund your Series A round
  It’s possible to top up a round or raise by crowdfunding – where any investor can join the round, putting in from a few hundred pounds to tens of thousands. Established platforms such as Seedrs and the private platform UK Business Angels Association make crowdfunding easier.

• Raise before a round with SeedFAST
  Our SeedFAST is an ‘advanced subscription agreement’. An investor gives you money now in exchange for shares in an upcoming funding round. For a SeedFAST, you don’t set a company valuation.
  Read more: SeedFAST – how ASAs work
• Use a SeedNOTE for more complex deals before a round
  If an investor wants interest or a return of capital, you can use our convertible loan note, SeedNOTE.
  Read more: SeedNOTE – how convertible loan notes work
• Top up after a round
  With SeedLegals you can build into your funding round the ability to top up the round to an agreed limit after the round is closed without needing to get further consent from your existing investors. This is particularly useful when most of your investors are ready to sign but one or two need more time.
  Then, after the round is closed (and you’ve got the money from the round investors), you can then use an Instant Investment with additional investors to top up the round.
  Read more: Instant Investment – how to top up your funding round

Talk to a funding expert

Interested to know more about raising your Series A with SeedLegals? Or not sure whether to try agile funding or start a full funding round? Book a free call with our funding strategist to get your questions answered, fast.