Guide: Loans, Grants and Equity Funding  Part One

Funding Stage Definitions

What is seed funding? When should I look for Series A? The chart below, with descriptions provided by the Enterprise Center of Johnson County, can help you determine what stage of funding to pursue.

Pre-Seed

• Amounts: <$100,000
• Company Life Stage: Pre company
• Purpose: Idea development and formation of founding team
• Available data: Little to none
• Who invests: Founder, Friends and Family; some state programs; contests; crowdfunding; SBIR; equity for service
• Risk level: Extremely high
• Expected rate of return: None
• Examples: Digital Sandbox companies

Seed

• Amounts: $250,000 - $1 million +
• Company Life Stage: Early development
• Purpose: Seed funding is used for research and development, proof of concept, product testing, prototype development. Companies move from idea to model and begin testing the market.
• Available data: Soft data, value proposition, founder experience
• Who invests: Founders, Friends and Family; crowdfunding, Angels
• Risk level: Extremely high
• Expected rate of return: 50-75%
• Examples: Knoda, Volunteer Mark

Series A

• Amounts: $1-3 million
• Company Life Stage: Development
• Purpose: Series A usually provides resources to further develop and scale the product; validate the business model (engage customers); and establish time to market
• Available data: Validation, time to market, initial customer feedback
• Who invests: Angels, VCs
• Risk level: Very high
• Expected rate of return: 40-60%
• Examples: Divvy HQ, Leap2, MyEDMatch

Series B

• Amounts: $3-7.5 million
• Company Life Stage: Shipping product
• Purpose: Series B funds are often used to scale a business. Additional funding allows the company to complete product development, ship product and create early revenues.
• Available data: Preliminary revenues
• Who invests: VCs
• Risk level: High
• Expected rate of return: 35-50%
• Examples: EyeVerify

Series C

• Amounts: $7.5-10 million
• Company Life Stage: Product backlog
• Purpose: The Series C is often used by a company for operating capital to expand markets, to strengthen the balance sheet or to finance an acquisition.
• Available data: Predictive revenues
• Who invests: VCs
• Risk level: Moderate
• Expected rate of return: 30-40%
• Examples: Aratana

Mezzanine

• Amounts: $10-20 million
• Company Life Stage: Profitable
• Purpose: Mezzanine financing usually helps a company prepare for an IPO or acquisition.
• Available data: Hard data, net income
• Who invests: VCs
• Risk level: Lower
• Expected rate of return: 25-35%
• Examples: AMC