What is series funding, and how do startup investment rounds work?

 

 

Startups don’t usually raise all the money they’ll ever need in one go. Instead, they do it in stages, called funding rounds. Each round reflects where the company is in its journey – from idea stage to global expansion. This step-by-step approach helps founders manage growth and lets investors decide how much risk they’re willing to take.

If you’re asking how to get funding for a startup, the short answer is through these rounds – starting small with pre-seed or seed money, then moving into bigger rounds like Series A, B, and C as the company grows.

And since you’ll hear it a lot, what does VC stand for? It stands for venture capital – investment money provided by professional firms that back high-growth startups in exchange for equity. Venture capital firms are usually the main players in Series A and beyond.

 

Overview of series funding (A, B, and C)

Series funding is the staged process of raising money as a startup grows. Instead of taking on all the capital upfront, founders raise smaller rounds tied to milestones. Each round attracts different types of investors and comes with bigger checks as the company proves itself.

• Series A happens once a startup has a working product and wants to scale it. That is the answer to what is series a funding.
  
  
• Series B comes when the company is already showing traction and needs cash to expand. This is what series B funding is in practice.
  
  
• Series C is for more mature startups, often preparing for acquisitions or even a public listing. This is where the shorthand what is b/c shows up, referring to later rounds of growth.
  

Together, these stages create a ladder of funding that supports a startup from idea to global scale.

 

How the rounds work step by step

Each round brings in different investors, check sizes, and expectations. To see how the system works, let’s walk through who invests and how ownership changes.

Who invests at each stage

• Pre-seed: founders, friends and family, angels, accelerators, tiny pre-seed funds. Money is used to validate the idea or build a first prototype.
• Seed: angels, angel syndicates, accelerators, micro VCs. Goal is product launch, first hires, early traction.
• Series A: venture capital firms. Goal is to scale what already works and prove a repeatable growth engine.
• Series B: larger VC firms and growth investors. Goal is faster expansion, bigger teams, new markets.
• Series C and later: late-stage VCs, growth equity, sometimes hedge funds and corporates. Goal is market leadership, acquisitions, or IPO prep.

So, again – what does VC stand for? Venture capital. These are professional funds that invest in high-growth startups in exchange for equity.

How equity is exchanged for capital

Agree on valuation
Two numbers matter. Pre-money valuation is what the company is worth before new money. Post-money valuation is pre-money plus the new investment.

Calculate ownership
Investor ownership = investment divided by post-money valuation.
Example: pre-money 8 million, new money 2 million, post-money 10 million. The VC owns 2 ÷ 10 = 20 percent after the round.

Understand dilution
Existing shareholders are diluted when new shares are issued. If founders owned 60 percent before the round, they now own 60 percent of the smaller pie, which is 48 percent in this example.

Account for the option pool
VCs often require or expand an employee option pool. If a 10 percent pool is created pre-money, it dilutes founders before the VC investment. Always model this.

Choose the instrument

• Pre-seed and seed often use SAFEs or convertible notes that convert into equity at the next priced round, usually with a cap or discount.
• Series A and later are usually priced rounds with preferred shares and investor rights.
  
  

Close and update the cap table
Money lands in the bank, shares are issued, the cap table is updated, and the company executes the growth plan tied to the round.

Typical check sizes and what to expect

Ranges vary by country and market cycle. Treat these as ballparks.

• Pre-seed: 50k to 500k
• Seed: 500k to 3m
• Series A: 3m to 15m
• Series B: 10m to 50m
• Series C and later: 30m to 200m plus

How much is VC can mean two things.

• Check size: see the ranges above.
• Ownership target: many VCs aim for 10 to 25 percent at Series A, often lower at later rounds.

Quick beginner example

• You raise a seed SAFE with a 6 million cap for 1 million. No shares are issued yet.
• At Series A, the company is priced at a 12 million pre-money and raises 4 million. Post-money is 16 million.
• The seed SAFE converts at the 6 million cap, not 12 million, which gives those seed investors a larger slice.
• After accounting for a 10 percent option pool created pre-money, founders, seed holders, and the new VC now share the cap table based on the post-money ownership math.

Keep your model simple, write down assumptions, and always test dilution with and without an option pool so there are no surprises.

 

How startup valuation is decided

Every funding round starts with one big question: what is this company worth? The answer shapes how much money founders can raise and how much ownership they have to give up.

What investors look at

• Revenue – Early sales are the clearest signal of value.
• Traction – Growth in users, signups, or engagement.
• Team strength – Experienced founders or strong technical talent increase confidence.
• Market size – Bigger potential markets mean bigger possible returns.
  
  

How valuation changes

Valuation usually rises with each round if the company hits milestones. Pre-seed and seed valuations might only be a few million. By Series A, it can jump to tens of millions. By Series C, hundreds of millions or even billions if growth is strong.

Why it matters for ownership

The higher the valuation, the less equity founders give away for the same amount of money. For example, raising €5 million at a €20 million valuation means giving up 20 percent. The same €5 million at a €50 million valuation means giving up only 10 percent.

Connecting back to venture capital

Venture capital firms invest based on these valuations, aiming to own enough equity to make big returns. How much is VC depends on two things: the check size they write and the equity percentage they target. Most VCs aim for 10 to 25 percent ownership at Series A.

Example: how valuation affects equity ownership

*Assuming founders start with 100% ownership and no other dilution (simplified for clarity).

This shows why valuation matters. The higher the valuation, the less equity founders give away for the same money. But every new round still dilutes earlier shareholders.

 

Pre-seed funding explained

Pre-seed is the very first stage of outside money a startup touches. At this point, there is usually no product, no revenue, and sometimes not even a full team. The money raised is used to move from an idea to a first version that can be shown to customers or investors.

Where the money comes from

• Founders themselves – savings, credit cards, or personal loans.
• Family and friends – often small checks to support the founder.
• Angel investors – wealthy individuals willing to take early risk.
• Accelerators or incubators – programs that provide small amounts of capital, mentorship, and networks.

How the money is used

• Building a prototype or MVP (minimum viable product).
• Researching the market and testing demand.
• Covering small operational costs like software tools, legal setup, and early hires.

How to use pre-seed funding wisely

If you’re asking how to use pre-seed funding, the answer is to spend it on validating your idea. The goal is not growth at this stage – it’s proving that your concept has potential. Every euro should help you answer: does this product solve a real problem, and will people pay for it?

 

Seed funding explained

Seed funding is the first official round of startup investment. At this point, the idea has moved past the concept stage and needs money to grow into a real business.

What is seed funding?

Seed funding is money provided to help a startup move from prototype to product launch. It’s usually the first time founders raise money from outside investors beyond friends and family.

What is a seed round?

A seed round is the funding event where investors put in money in exchange for equity. The amount raised can range from a few hundred thousand to several million, depending on the market and the startup’s traction.

What is seed money?

Seed money is the capital that fuels the earliest phase of operations. It covers building the product, testing it with customers, and proving that the business model can work.

What is seed capital funding?

Seed capital funding is another way of saying seed investment. It’s the cash injection that allows founders to make key hires, validate the business model, and show enough traction to attract Series A investors.

Purpose of seed funding

• Build a full product beyond the MVP.
• Hire the first employees (engineers, sales, marketing).
• Test customer demand and gather market feedback.
• Begin generating early revenue.

Who invests in seed rounds?

• Angel investors – individuals investing their own money.
• Accelerators – programs like Y Combinator that provide capital and mentorship.
• Early-stage venture capital firms – small VC funds focused on startups before Series A.

Example of seed funding in practice

Imagine three founders in Barcelona building a food delivery app for local restaurants. They’ve already built a prototype with their own savings but need more money to launch.

How much they raise: €1 million in a seed round.
Who invests:

• €300k from two angel investors.
• €200k from an accelerator program.
• €500k from an early-stage VC fund.

Valuation: The startup is valued at €4 million pre-money. With €1 million invested, the post-money valuation is €5 million. Investors together own 20 percent of the company.

How they use the money:

• €400k to hire engineers and a sales lead
• €300k for marketing to attract first users.
• €200k for operations and partnerships with restaurants.
• €100k set aside for legal, software tools, and runway.

The goal is not massive profits at this stage. The goal is proving the product works, customers want it, and growth is possible. If successful, the startup can raise a Series A funding round later to scale further.

Series A funding explained

Series A is the first “big” round of venture capital. By this point, the startup has a working product, early customers, and signs of traction. Investors now want to see product–market fit – proof that the business solves a real problem at scale.

Purpose of Series A

• Expand the team beyond the early hires.
• Scale operations and marketing.
• Strengthen product features and user experience.
• Build predictable revenue streams.

Who invests

• Larger venture capital firms.
• Sometimes strategic investors (corporates) if the startup fits their industry.

Check sizes usually range from €3 million to €15 million, depending on the market.

 

Series B funding explained

Series B comes once the company has clear product–market fit and strong revenue growth. This round focuses on scaling aggressively—adding new markets, hiring big teams, and pushing sales.

Purpose of Series B

• Hire managers and executives to lead departments.
• Expand internationally or into new regions.
• Accelerate user growth through marketing.
• Improve infrastructure to handle larger operations.
  
  

Who invests

• More institutional VC firms, often bigger funds than in Series A.
• Existing investors often join again to protect their stake.
  

Check sizes often run between €10 million and €50 million.

 

Series C funding explained

Series C and beyond are late-stage funding rounds. These are for mature startups preparing for very large moves, like acquisitions, massive expansion, or going public (IPO).

Purpose of Series C

• Achieve market dominance.
• Buy out smaller competitors.
• Prepare for an IPO or major exit.

Who invests

• Late-stage venture capital firms.
• Private equity funds.
• Hedge funds and sometimes even large banks.

Check sizes typically exceed €30 million and can go into hundreds of millions, especially for global “unicorn” startups.

 

Potential downsides of series funding

Raising money helps startups grow, but it comes with trade-offs. Founders need to understand what they’re giving up when they accept outside capital.

Founder dilution

Every new round issues more shares. This means founders own a smaller slice of the company after each investment. For example, if you start with 100 percent ownership and raise multiple rounds, you could be left with less than 20 percent by Series C.

Pressure from investors

Venture capital is not patient money. VCs expect fast growth and a clear path to large returns. That pressure can push founders to prioritize scaling at all costs, even when the business is not ready.

Misaligned incentives

Sometimes the goals of founders and investors diverge. Founders might want sustainable growth, while investors push for a quick exit or IPO. This tension can create conflicts in strategy.

How much is VC in this context?

When people ask how much is VC, it’s not just about the size of the checks. It’s also about the influence investors gain. A VC that puts in millions often takes board seats and voting rights, which means more say in how the company is run.

Real-world example of startup series funding

Here is Airbnb’s journey from seed to Series C. It shows how funding amounts and valuations grew as the company hit milestones.

Source for amounts and post-money valuations.

What to learn from this

• Valuation rose from $2.5 million at seed to $2.9 billion by Series C, roughly a 1,160× increase as product, revenue, and market traction improved.

• Each round brought larger checks and new investor types, which is typical as risk declines and scale increases.

If you prefer a European example, Revolut’s publicly reported milestones show a similar pattern, with Series C at a $1.7 billion valuation and later rounds reaching much higher private valuations.

 

Alternatives to traditional series funding

Not every startup wants or needs to follow the venture capital path. There are other ways to raise money that can give founders more control and less pressure. If you’re wondering how to get funding for a startup without jumping into Series A, here are some options.

Bootstrapping

Building with your own savings or revenue. It’s slower but you keep 100 percent ownership and control. Many profitable companies never raised a VC round.

Crowdfunding

Platforms like Kickstarter or Indiegogo let customers fund your idea before it’s built. Equity crowdfunding platforms also exist, where small investors buy shares in early-stage startups.

Revenue-based financing

Lenders provide money in exchange for a percentage of future revenue until the loan is repaid. Unlike VC, you don’t give up equity.

Government grants and subsidies

In Europe and elsewhere, startups can apply for grants that support research, innovation, or job creation. These don’t require giving up ownership.

Accelerators and incubators

Programs like Y Combinator or Techstars (and their European equivalents) give small checks, mentorship, and investor networks in exchange for equity. They can be a springboard to future VC rounds or a standalone growth path.

 

Series funding explained in kids’ terms

Imagine you want to run a lemonade stand at the playground.

• What is seed money? That’s when your parents give you a few euros to buy lemons and sugar. It’s the very first money that helps you test if kids even like your lemonade.
• What is series A funding? Now your lemonade stand is working. Kids keep coming back. A friendly neighbor gives you more money so you can buy a bigger table, more cups, and maybe hire your friend to help sell. That’s Series A—money to grow something that already works.
• Series B happens when your lemonade stand is popular across the whole playground. More neighbors invest so you can set up on other streets and hire even more friends.
• Series C is when your lemonade stand becomes a whole chain across the city. Bigger investors like banks or funds step in because you’ve proven you can be a big business.

That’s all series funding is – getting more money step by step as your idea grows bigger.

 

Frequently asked questions

What is seed funding?

Early money to build a product, hire first staff, and test the market.

What is a seed round?

The fundraising event where seed funding is raised, usually from angels or early VCs.

What is seed capital funding?

Another name for seed funding, used to turn an idea into a real business.

What is Series A and Series B funding?

Series A funds scaling after product–market fit. Series B funds expansion into new markets and bigger teams.

What does VC stand for?

Venture capital.

How much is VC?

Check sizes vary: millions in Series A and tens of millions in Series B. VCs often aim for 10–25% ownership.

The bottom line

Startup funding usually starts with pre-seed, moves to seed, then grows through Series A, B, and C. Each round brings in bigger investors, larger checks, and more dilution.

For founders asking how to get funding for a startup, the key is timing. Raise only when you have a clear milestone to hit, and understand what you’re giving up in ownership. Knowing when and how to raise is as important as the money itself.