Series A Round funding is usually the first round of stock offered during an initial funding cycle for a startup company. It is named for the preferred stock (series A) that is awarded to investors and which entails additional rights and privileges to such investors including in the case of an acquisition or IPO.
Series A funding has generally been the conventional funding route for startups. However, it can be sometimes a long, cumbersome process for investors and founders. Silicon Valley attorneys led by Ted Wang from Fenwick have increasingly been offering an alternate, faster, hybrid option called Series Seed.
What is series seed funding?
Series seed funding is like Series A but with fewer details and requirements, which facilitates faster negotiation and document preparation process.
Essentially, a few key features of Series A funding are postponed, and the remainder form the series seed funding. Key features that are postponed include: registration rights, anti-dilution clauses, and veto rights.
Who is a good candidate for Series Seed funding?
For investors reluctant to execute a convertible note, Series Seed could be a better option because it gives equity not debt.
When should you use Series Seed funding?
Usually this is more suitable for seed-very early stage startups. Once the company is more mature, where valuation is higher and the round is bigger, it would make more sense to do a regular Series A.