14 Seed has become Series A, Series A has become Series B
This anecdote covers
- How the early-stage VC industry has matured over two decades
- What lighthouse customers are and why they are so important
- Current early-stage (Seed, A, and B) rounds’ investment criteria and expectations
Things in the startup financing world have changed significantly in the 35 years (so far) that I have been a founder and/or CEO of a startup. Whatever the current snapshot in time presents you when seeking an investment, you will have to understand and play the game as it is. Investors in your company will certainly want to maximize their returns—and any other benefits they can reap—and you need to do the same from the other side of the table.
14.1 A shift in investment criteria
There has been a shift in how investors think about what it takes to be ready for, as well as what is expected during, the range of early-stage financing rounds: Seed, Series A, and Series B. It used to be that Seed financings only had Angel investors, it would be an investment in the range of $500,000 to $1 million, and it’d be on the sole basis of a team and an idea. What was expected of you during the Seed stage was for you to build a prototype of your product and find enough lighthouse customers (described in detail in section 14.2) to prove you have a minimum viable product (MVP). With that, you would be well-positioned to raise a $2.5 million Series A.