For startups, raising capital is an important milestone that can help achieve goals, grow the business, and hire a team. Two early-stage funding rounds are Seed and Series A rounds. While both occur early, each of these rounds can have specific goals, purposes, amounts, and may attract different investors. In this blog, learn more Seed vs Series A funding rounds and the differences and similarities between each round.

Seed vs Series A Funding

Seed Funding

While some startups choose to raise Pre-Seed funding from friends, family, or even some accelerators or angel investors, Seed funding can often be a startup’s first external funding round. Seed funding itself can help provide the initial capital to transition the business from an idea or prototype into a minimum viable product (MVP).

The size of a Seed funding round can vary greatly depending on industry, geographic region, and existing traction. The size of a seed round on average generally runs from $500,000 to $5,000,000.

Purpose of Seed Funding

The capital from Seed funding is most often allocated to foundational activities. Seed funding can help a startup validate their product, attract initial users, and build the foundation for future growth. Some of the main uses include:

• Product Development – building an MVP or initial prototype
• Market Research – conducting research to refine target market
• Team Building – hiring core team members
• Go-To-Market Efforts – executing initial marketing campaigns to generate a waitlist and gather initial feedback

Seed Investors

Seed investors are most often angel investors and specialized early-stage VC funds. They are typically willing to take on the significant risk associated with investing in early-stage startups. Their due diligence efforts usually focus on founder capabilities, market size, and other qualitative metrics.

Series A Funding

On the other hand, Series A rounds are typically larger, and conducted by more mature startups that may have found product-market fit, and now needs additional capital to scale operations, develop products further, and invest in infrastructure. At this stage, many Series A investments have shifted to institutional investors like venture capital or private equity firms.

An average Series A funding round size can vary from $3M to $15M depending on industry, traction, use of funds, and other factors.

Purpose of Series A Funding

The capital from Series A funding is most often allocated to growth activities. Series A funding can help a startup scale the business, market its product, and expand its team. Some of the main uses include:

• Scaling User & Revenue Growth – investing in customer acquisition channels
• Team Expansion – hiring key roles across product, sales, and marketing
• Operational Refinement – investing in technology, infrastructure, processes, and systems to support growth
• Market Expansion – exploring adjacent markets or new customer segments

Series A Investors

Series A investors have typically shifted to institutional venture capital firms or private equity firms. These institutional capital sources can have higher expectations than individual investors and stringent due diligence requirements. Series A investors usually look for proven product-market fit, demonstratable traction, a scalable business model, and strong founding team.

Transitioning from Seed to Series A

Making the transition from a Seed vs Series A round can be an important milestone for a start-up. It may signify a shift from validating a concept to building a scalable business. Founders should prepare for this transition by focusing on achieving milestones that help to signal their readiness to Series A investors. These milestones typically include launching an MVP, acquiring early customers, demonstrating growth, proving market traction, and building repeatable processes for sales and marketing.

Final Thoughts

While Series A funding is typically the next funding a startup receives after Seed funding, these two funding rounds are meant for fundamentally different phases of a startup’s lifecycle. Seed funding can provide capital to transform an idea into a product, while Series A funding helps scale operations for an existing product with market fit. Understanding the differences, the types of investors, round sizes, and purposes can help founders be prepared to raise these funding rounds for their own startups.

Is your startup ready to raise its next round of funding? Apply today to raise capital with MicroVentures!

Want to learn more about growing a startup? Check out the following MicroVentures blogs to learn more:

• Flexibility vs Ownership: Revenue-Based vs Equity Financing
• Finding Funding: Bootstrapping vs Fundraising
• What Private Market Investors Look for in a Startup’s First Funding Round
• Financials and Fundraising: Financial Reviews vs. Financial Audits

*****

The information presented here is for general informational purposes only and is not intended to be, nor should it be construed or used as, comprehensive offering documentation for any security, investment, tax or legal advice, a recommendation, or an offer to sell, or a solicitation of an offer to buy, an interest, directly or indirectly, in any company. Investing in both early-stage and later-stage companies carries a high degree of risk. A loss of an investor’s entire investment is possible, and no profit may be realized. Investors should be aware that these types of investments are illiquid and should anticipate holding until an exit occurs.