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cherman cherman
 
M$1 January 01, 2009 09:03 PM

What are Series A, B and C of funding? Explain in full details.

Example of company
Series A >> VC1 invests 5 million
Series B >> VC2 invests 10 million
Series C >> VC3 invests 15 million

Who owns how much of the company?
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wizkid wizkid
 
 January 02, 2009 04:29 AM
There is no straight answer to this question - I have seen VC-backed C round financing in a company where the largest shareholder was still the owner. Amounts also very company to company, industry to industry. Traditionally however, the original principals lose majority interest after A (sometimes B) rounds, along with relinquishing board seats and restructuring their new capitalization based on the structure preferred by the investor and led by the investor's legal team for even MORE control - usually the original principals lack the knowledge and legal expertise to even question their sudden loss of power. Anyway... A rounds can go up to $5M, B up to $50M, leaving C at $50M+.

Usually A round financing happens after some success has been proven in the market (local test market, unique technology able to be valued, superior business plan and go-to market strategy, etc). A lot has to happen before A round is even thought about. Usually the best place to get started in looking for pre ABC are incubators like Charles River Ventures (www.crv.com) or angel investor networks - let me know if you need introductions to any.

B and C are growth stage financing rounds, used to prepare companies for their exit or acquisition strategies - either capturing market share, refining product or purchasing similar companies.

As one that went from startup to high-profile acquisition, all in a matter of 3 years, I believe I am the most qualified to discuss this topic.
Source(s):
my brain and experiences

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easyeboy easyeboy
 
January 01, 2009 09:09 PM
They are all series of venture capital funding to a startup or business venture. A comes before B, and B comes before C.

Usually angel investments come before series A round.

Series A:

A Series A round is the name typically given to a company's first significant round of venture funding in the Silicon Valley model of start-up business formation.
The name refers to the class of preferred stock sold to investors in exchange for their investment. It is usually the first series of stock after the common stock and common stock options issued to company founders, employees, friends and family, angel investors, etc.

Series B and C.

Series B is the second round, after Series A, and Series C comes after series B.

Company ownership is based off the company valuation and negotiations between the company and the venture capital firm. So, if a company is valued at $50 million, and an investment is raised at $10 million, then the venture capital firm who invested $10 million will own 20% in this company.

Usually the newer companies have a lower valuation, which prompts investors to ask for more equity, as the deem the risk to be greater. However, sometimes valuations are increased in early stage companies due to intellectual property, revolutionary scientific discoveries, and a strong or proven management team.
Source(s):
http://en.wikipedia.org/wiki/Venture_round
http://en.wikipedia.org/wiki/Series_A
http://en.wikipedia.org/wiki/Angel_investor http://en.wikipedia.org/wiki/Venture_funding


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robbrown robbrown
 
January 01, 2009 09:12 PM
Who owns how much of the company is determined by the contract negotiations that take place before money is offered.

Typically, the earlier the round, the less the company is worth. This results in early stage funding partners asking for more equity.

Again, in typical situations a single lending company will setup release dates for funds based on dates and goals. In this case and with careful planning and execution, a company should not need additional funding.

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tracebooks tracebooks
 
January 01, 2009 09:21 PM
If this is a question for an assignment, there really isn't enough detail to answer this properly. These are rounds of funding, but there are crucial stages missing here. The founders, their families and friends, "angel" investors that fly in and keep it going in the planning stages...all these would own part. Since these are not in the example given above, there is not a good way to answer this question.

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mrgunn mrgunn
 
January 02, 2009 01:53 AM
Investors theoretically own the percentage of the company that they provided funding for, but it really all comes down to negotiation. Each time you take on funding, you need to get to a much higher valuation using that funding in order to make it worth it. 5% of $100M is better than 50% of $5M.

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