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Seed Funding vs. Series A: What's the difference?

So you’re an exciting startup looking to take the next step on your company's story. Naturally, your eyes wander towards investment. And yet the ancient proverb stands….do I raise seed funding or Series A funding?

It’s a question that’s seemingly been worrying innovators for as long as time, but it’s one that can be figured out.

Below we have outlined the key advantages of both seed funding and Series A funding, so you can decide which is the best avenue for your company.

The Basics

Seed Funding Round: A seed funding round is a series of coordinated investments from up to 15 investors (or less) totalling an average value between £50,000 and £2million.

Series A investment: A Series A funding round is a little different. These are mostly made up of a smaller number of Venture Capital firms (VCs) that will make investments totalling between £2m-£10m. They make these investments in exchange for equity in your business.

It is important to note that you shouldn’t directly compare the two, as whilst they’re both key indicators of a company’s growth potential, they relate to different stages of this growth.

A company can be super innovative and very early stage - and just because a seed-funded business hasn’t yet raised Series A, it doesn’t mean it won’t.

Seed funding vs Series A

There are a number of advantages for both methods of fundraising, we have outlined the main points below:

Seed Funding

The functionality of a seed round is one of the key reasons why so many young startups look to raise it. It gives your company the funds to expand, allowing you to test ideas, refine your customer acquisition models, and streamline difficult processes.

Often, this funding can be a great way to fill in gaps in your armory by hiring new knowledge in key areas of your offering ahead of a major period of growth.

Once a startup jumps to Series A, the equity requirements of much bigger funds such as VCs leave less negotiating room to bring on any other smart investors or individuals that can help solve problems and innovate. As such, it is advised that if you’re still at an early stage of your growth, try and raise as much seed funding as possible before taking the plunge into Series A.

Advantages of Seed Funding:

  • More flexibility to change your businesses course, according to the demands of the consumer
  • Gives you space to test ideas
  • More time to meet potentially crucial business partners

Series A

Series A funding is a significant investment from a small pool of investors. With this investment comes the expectation of rapid growth. The decision that most startups will need to make before beginning a Series A funding round to be sure the product and software are up to scratch to accommodate significant growth within a small time frame.

However, if you have reached the stage where you are sure you are ready to onboard and investors and grow dramatically, then Series A is a great way of showing this. Series A funding brings prestige and brand recognition that you will likely not get through seed funding. It also allows you to scale your business faster and work with experienced investors who will help map out your trajectory.

Series A is often the point at which young companies will introduce themselves to the media. It’s a statement that’s been made - and the higher level of investment means it’s often more interesting to journalists than a seed round might be.

The investment also means marketing efforts can be stepped up and bigger go-to market strategies executed.

Advantages of Series A

  • More investment and ability to scale faster
  • Increased name recognition
  • Show of confidence in your company that you can take to the media

Whilst both funding rounds have their advantages, most startups begin by doing a seed funding round. This gives you better autonomy in order to alter your offering to market demands, develop a settled working business model and optimise your distribution lines. For those startups that do decide to make the jump directly to Series A, they’ve often already been offered major funding by a VC privately or are led by a serial entrepreneur, thus having a good knowledge of the funding landscape.

One thing that can be agreed on is that both are a great sign of momentum for young tech startups. Investment from outside parties is the ultimate showing of confidence and another sign of the great work your company is doing.

If you’re looking for more practical expertise on how to publicise your funding round, how about you look at our most recent blog on just that...

Here at Marlin, we work with tech innovators of every shape and size, from nimble startups looking to show the groundbreaking work they’re doing, to VC-backed behemoths on a mission to make the world a better place. If you think we can help you, get in touch through [email protected] or drop us a DM on LinkedIn or Twitter.

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Date Published

January 20, 2020

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