Startup funding: What does it mean?

I am new to the startup world and do not understand what terms such as “Seed,” “Series A,” or “Series B” mean. What are the advantages/disadvantages of joining a startup at the “Seed Stage”? What about jumping in at the “Series A” or “Series B” stages?

During the Seed Stage, the startup has moved beyond the concept stage and has started approaching friends, family, and angel investors to ask for financial support. Joining a startup in the Seed Stage can be risky, especially if the startup does not have its finances set. Over 60% of Seed Stage startups (otherwise known as Pre-Series A startups) fail. But if the startup does take off, you will earn a greater percentage of the profit sharing, as long as the company continues to operate.

In general, Series A startups are smaller and younger. Series A falls between the initial Seed Stage and before the Series B funding round. If a startup is Series A, that means that it has received its first round of venture capital or private equity (VC) funding. If the startup is Series B, that means that they have accomplished certain milestones and received a second round of funding. The younger the startup is, the more likely you are to receive a larger percentage of the startup’s equity. If a company has received funding within the past few months, there is a good chance that they are about to ramp up their hiring.

Eventually, startups enter the late stage. This could lead to an acquisition, an initial offering, liquidation, or failure.

Check out the following list of startups and their respective funding stages:

  • Seed: Oloid, STILT, theklicker, Invisible AI, Plug and Play

  • Series A: Webflow, Springboard

  • Series B: Osaro, Snapdocs, Tray.io, BlueShift, Directly, Instabase

  • Series C: Plaid, Lattice, Embark, Airtable

  • Series D: Onfido

  • Series E: ForgeRock

  • Series F: Robinhood, AvidXChange

  • Acquired: Zoom, Instagram, WhatsApp

  • IPO: Twitter, Snapchat

  • Failed: Theranos, Jawbone, Yik Yak, Doppler Labs, Wonga

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To add to what @Danielle has mentioned, depending on the startup you have to purchase the equity offered to you. The purchase price/strike price of the equity is inversely proportional to the funding round the company is in. If you start working at a startup when it is Series A, the cost of your equity might be lower than when you join it as a Series C or later. The strike price is set by an audit process which is done by an independent agency based on analysis of the companies financials and other information. So if you get an offer from the startup, ask them about strike price of the equity as you will be paying for it when it vests.