Early Stage Funding

Early stage funding is the first stage of actual serious funding, and it is in this particular stage that venture capital funding usually falls in, whereas seed funding is usually comes from either angel capital, debt capital or capital from other alternative sources.

Venture capital is also private equity; however, the difference between them is that venture capital is private equity that is earmarked for start-up companies and early stage companies.


Early stage funding is usually divided in two series or rounds of funding. These rounds of funding are series A and series B, and are discussed in greater detail below.

Series A funding is the first round of funding given in early stage funding, and the amount of funding for series A can range on average from $2 million to $5 million. In some cases, with investors who have deeper pockets, the funding can be even more.

The object of series A funding is to provide the start-up company with enough capital to meet operational or pre-operational expenses for the next six months to five years.

What is series A used for? Well, series A can cover a wide variety of expenses, such as product development, assembly line construction and employee and executive salaries.

The important thing that needs to be kept in mind is that milestones need to be set and met in a timely manner.

The $3 million investment is never given in one lump sum, but in a series of tranches. Each tranche issued is a given sum of money to meet the set milestone.

Upon meeting one milestone, the next tranche is issued to meet the following milestone, and so on. Once the series A funding round has been completed, each tranche has been issued and all milestones have been met, the company and its investors can then determine when to start working on series B funding.

Series B funding is funding that follows the series A round of funding and is usually a larger sum of money than the series A funding round.

Typically, a series B round of funding can generate a start-up from $5 million to $10 million in capital. If there is a strategic corporate investor involved in the series B round of funding, this round of funding can even generate up to $20 million in capital for the start-up company.

Series B funding basically serves the same purpose as series A funding, but for a longer period of time, allowing the start-up to open for business and start generating profit.


Both series A and B funding rounds are usually dealt by venture capitalists or strategic corporate investors.

The key thing to take into consideration with early stage funding is that it should only be pursued once you are certain that your product or service prototype is ready for production and that you are either ready or close to being ready to open for business.

By the end of series B funding, you are expected to already be in business and you should already be starting to generate profits.