What is a Company Stage?

It’s occurred to you before while scrolling through the press release of a recently-funded startup. Seed? Surely that company is Series A. Pre-seed? No, they’re definitely seed. Everyone is familiar with the stages applied to startups, and yet, nobody seems entirely sure of how to define their perimeters, especially when it comes to the size of their respective funding rounds. 

Part of this confusion stems from shifting startup investor habits. Seed investors, for example, even as they age and gain more wealth, are continuing to split their funds between the same number of rounds as they did when they were first getting started, resulting in rounds that are larger but still classified as seed (Crunchbase News); last year the average startup raised a total of $5.6 in seed funding, up $0.4M from 2017 (Tech Crunch) and $3.9M from 2010. What’s more, as Wing venture capitalist Peter Wagner discussed with Tech Crunch, in recent years, some firms have developed metrics that allow investors to more pointedly assess early-stage growth, meaning that money can be more confidently put into younger companies, skewing previous definitions of what funding amounts applied to what stages. “We now have a whole cohort of investors who’ve come into the business and been trained to make investments based on ratios around growth potential and expansion factors, among many other things,” says Wagner.

So Where Do I Fit?

Though the exact figures associated with each stage’s funding may be difficult to pin down, each stage has more tangible, non-monetary benchmarks. 

Pre-Seed

Generally speaking, pre-seed startups--also called concept or idea-stage startups--are those that are just getting off the ground. They often have little to no revenue, no minimal viable product (MVP), and no employee base beyond their team of co-founders. What they are likely to have, however, is some sort of customer validation or completed pilot, and a couple advisors. Because of their lack of product and key performance indicators (or KPIs), any funding they receive often comes from their own pocket--or those of their family and friends (this is often called love money) (CP Ventures). In the past, institutional investors were less likely to be present at this stage, however, as Wagner points out, in recent years, more and more early-stage venture firms have come into being, such as BCF Ventures.

Though many that fall into the pre-seed category are nascent companies, some companies remain in the pre-seed stage for a long time as they work to find their product market fit and gather funds; we’ve seen many cases of this at the Fundica Roadshow. 

Seed

Seed startups are those that have developed their MVP or Beta product, patented this intellectual property (IP) in some respect, and begun to bring in revenue. In addition to their team of founders, they might have 1-5 additional employees. In the past, money from angel investors as well as smaller institutional rounds could be expected at this stage; however, in recent years, the size of rounds has increased (CP Ventures), creating “a huge variance in seed sizes” (The SaaS Growth Blog), with numbers ranging from $150,000 to $1.5M (The SaaS Growth Blog). 

Series A

Series A startups typically have their product fully developed as well as reliable revenue growth. In addition to a solid team of co-founders, advisors, and directors, Series A companies often have a team of employees that’s 5-20 people strong. What capital they bring in is likely to be Venture-based and in the millions of dollars (CP Ventures). 

Series B-C 

Unlike many of their predecessors, Series C companies are in a relatively stable position, business-wise, with a strong customer base, revenue stream, and a proven history of growth. What rounds they are able to rise will likely be put towards developing additional products, expanding into new markets, or acquiring other companies--in short, scaling. This is often the last stage at which a company will accept investment from institutional investors (Investopedia).