What are Series A investors actually buying? Preferred Series A shares are new equity shares created in a Series A financing round. They carry greater rights and privileges than preferred seed shares, including payment priority in an acquisition or liquidation. section 10.4
A simple Series A issuance
Suppose investors value the company at $3 million before the round and invest $2 million for 40% ownership. The company creates 6,666,667 preferred Series A shares and adds them to the 10 million shares already outstanding, producing a $5 million post-money valuation and a 30¢ price per share. These new shares typically move ahead of earlier preferred shares when a small acquisition or liquidation payout is distributed. section 10.4
Figure 10.1 Pre- and post-money valuations for a sample seed and Series A. Values are in millions, except price per share.
A valuation figure helps compare the seed and Series A rounds, including ownership, share counts, valuations, and price per share. section 10.4
