The Bull

Sunday 22

July, 2018 5:33 AM


"A" Round Financing

What does it mean?

“A” round financing, or Series A financing, is the initial stage of financing that private equity firms or venture capitalists take in a business venture. This round of financing generally occurs after the founders have invested seed money in the business concept.

“A” round financing is usually taken in the form of convertible preferred stock and allows the investors some control in the business. 


TheBull says...

The basics of “A” Round Financing

Through the various rounds of financing, investors are generally inclined towards convertible preferred stock as opposed to common stock. Unlike common stock, convertible preferred stock has greater security and features such as dividend accrual and convertibility into common stock. 

“A” Round Financing in use

Generally, the initial investments come from the founder or the founder’s connections such as their family and friends who are willing to invest in the business concept. “A” round financing typically begins after this initial stage of financing. The initial investments from the founder’s connections are helpful but tend not to be as supportive as “A” round investments. Often, “A” round financing can exceed $1m. With this kind of investment, the business’s team is expanded, its costs are covered, and it moves closer towards the market.

Investors at the “A” round of financing have more control over the new business than the other investors. The “A” round investors can take more shares of the company and guide certain business decisions of the founder and encourage them to adopt certain corporate strategies or meet targets set by the investors. After the “A” round, the founder is accountable for the company’s growth and in the future could be asked to demonstrate how the company has advanced. In turn, the founder will refer to the investors in order to attract new talent, partners or potential investors to the company.

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