Understanding startup funding rounds is crucial for founders seeking to strategically secure financing, target the right investors, and negotiate effectively.
Startup funding rounds include pre-seed funding, seed funding, Series A, Series B, Series C and beyond. The number of rounds your startup can go through can vary — depending on your industry type, growth trajectory, and funding needs.
This guide breaks down each funding stage to help you plan your fundraising journey with confidence. We’ll start by showing you the characteristics of each funding round and then explore the practical ways you can plan your startup’s fundraising strategy.
What is a funding round in the startup world?
Startup funding rounds allow founders to raise capital by offering equity to investors — helping startups achieve key milestones like product development, team expansion, and scaling.
They can also help your startup overcome financial challenges that may affect product development, team expansion, and the overall growth of your company. Going through funding rounds and securing funding from respectable investors can also help you validate your startup and attract more partnerships and investments.
What funding rounds are available for a startup?
Each funding round has its purpose and how capital is injected at different development stages to accelerate your startup’s growth.
The funding rounds for a startup are listed below:
- Pre-Seed Funding
- Seed Funding
- Series A Funding
- Series B Funding
- Series C Funding and beyond
In this section, we will be taking each round of funding and dissecting it to help you have a closer look and clear view of what each of them is like. We will also walk you through a practical example to help you understand it better.
1. Pre-Seed Funding
Pre-seed funding — often sourced from personal savings, friends, family, or angel investors — is the first stage of financial support that helps transform an idea into a viable concept. These funds typically range from tens of thousands of dollars and are used for early activities like prototyping and market research.
The funds obtained from this funding round are majorly used for essential activities like creating a simple prototype, conducting initial customer interviews, and market research.
How can a pre-seed funding round help your startup?
For example, you have a budding idea to create a wellness app that can curate workouts based on individuals’ biofeedback. With this round of funding, you get to make a market analysis to know if there is a demand for such an app.
This will help you see if you must create a prototype to show potential users how the app will function.
2. Seed Funding
At this stage, startups must demonstrate traction, with a Minimum Viable Product (MVP) addressing real problems and a defined target market. Funding typically ranges from hundreds of thousands to a few million dollars, covering product development, initial marketing, and even team building.
This automatically makes the investors expect a competitive business plan and a solid target market. At this stage, you will be required to show evidence that your product solves real-life problems and has the potential to gain enough traction with your solid target market.
The funds obtained in this round will cater for the development of an active MVP, initial marketing to attract early customers, and possibly, build an initial team to support product development and customer acquisition.
How can a seed funding round help your startup?
The prototype of your wellness app you put out at the pre-seed stage has gathered positive feedback. With the funds gotten at the seed funding round, you can now launch your MVP to a limited audience and follow it up by marketing it to early users.
3. Series A funding
Series A rounds, ranging from several hundred thousand to tens of millions of dollars, are focused on scaling startups with proven product-market fit. Investors expect a strong revenue model, an airtight market expansion strategy, and a clear path to profitability.
Startups at this stage usually have a product tested and trusted by many users and still have a thriving user base. The focus at this funding stage is on revenue generation, expansion of user base, and direction heading to profitability. Investors in this funding round want to see a business ready to scale with a solid market strategy.
The funding obtained from this round is majorly used for scaling—especially for sales and more marketing, team expansion with incredible talents and experience, and infiltration into fresh markets to spark overall development.
How can a Series A funding round help your startup?
Your wellness app has gotten better than it was at the previous stage, and your user base is also broader. This funding round allows you to expand your team, expand your existing market reach, and possibly try new markets to pump your user base further.
4. Series B funding
At Series B, startups are positioned for exponential growth — with stable revenues and a solid competitive foothold. This round supports market dominance, aggressive marketing, and strategic acquisitions.
The funds obtained here are usually hundreds of millions of dollars. At this stage, no one is telling you to build a solid business model because you have that and a solid position in the market.
However, the investors in this round are mainly venture capitalists — ready to pump capital into any startup with a clear path to significant growth in the market. These investors expect to meet a scalable business with a large user base and a strategy to break the market scale.
Therefore, capital obtained at Series B is used for scaling operations exponentially, marketing campaigns to acquire more customers and reach a wider audience, and possibly acquiring more businesses to hasten the company’s growth.
How can a Series B funding round help your startup?
Your wellness app has become one of the top-rated mobile app stores and has attracted a more extensive user base, and the revenue source is more stable. This round will help you scale up marketing to explore strategic partnerships with other fitness and wellness merchants or health insurance companies.
5. Series C funding and beyond
Series C and subsequent rounds focus on large-scale expansion, market consolidation, and exit preparation through IPOs or acquisitions. Investors seek significant ROI, making this stage highly competitive.
As many as 90% of global startups fail — so we must note that it’s not easy to make it to a Series C funding stage. However, the startups that do so (for example, Moniepoint) are likely to go on to become global giants.
Still, investors at this stage are already looking to exit, so they expect to see a significant return on their investment through a high-valuation IPO or a lucrative acquisition.
Conclusion
At Ingressive Capital, we specialize in supporting pre-seed and seed-stage startups ready to scale and disrupt industries. With up to $500,000 in funding, we empower founders to build the next Paystack or Mono.
Apply today and let’s build the future together.
