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From Seed to Series C: a Primer on Startup Funding Rounds

By Ryan Law on Mon, Apr 12, 2021

SaaS startups take on investment for one very simple reason: to grow quickly.

And though securing investment isn't a defining trait of a startup (see Paul Graham's original definition below),  it provides you with a huge headstart over your competitors. 

As Jason Lemkin says, bootstrapping a SaaS company is entirely possible: just expect it to add an extra four years to your timeline. In the ultra-competitive SaaS sector, that's time you don't have spare.

So today, I'm demystifying the world of startup funding rounds, and explaining the motivations (and common valuations) behind Seed through Series C investment.

A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of "exit." The only essential thing is growth. Everything else we associate with startups follows from growth.

Paul Graham

The 4 Types of Startup Funding Rounds

There are four primary types of startup funding rounds: Seed, Series A, Series B, and Series C (and beyond).

In some cases, the distinction between funding rounds is largely arbitrary, and determined more by the order in which funding is raised, as opposed to the reasons behind it: but there are still a few common characteristics that drive these distinct types of investment.

To make sense of startup funding rounds, there are also a couple of key trends that are important to understand:

  • The earlier the round, the riskier it is. This influences the types of people attracted to the investment, and the amounts invested. Early-stage investment attracts the more risk-loving investors, in the form of angels and VCs; later-stage attracts the more risk-averse, like banks and other financial institutions.
  • Investment has increased massively over the last decade. This is true both in terms of deal volume and capital deployed. Though there's been talk of an investment "bubble", recent slowdowns have been very short-lived.

1) Seed Round


$1.7 million (with significant variance)


Capital from a seed round usually fuels a startup's move beyond it's founding team, allowing the company to hire for its first few key employees.

Seed capital also fuels the building and launching of an early-stage product: providing the resources required to figure out the company's target market and userbase.

Traditionally, seed rounds were the reserve of angel investors, but in recent years, it's become much more common for Venture Capital investors to enter into seed rounds. This has had a dramatic impact on the average size of seed investment rounds.

The median angel-funded seed size has hovered around $150,000, but over the same time period, the median VC-led seed size hit a huge $1.5 million. In other words, the involvement of VCs leads to seed rounds ten times larger than those led by angels.

This can lead to a lot of variance in seed sizes. According to Mattermark data, the largest seed round in 2015 was a staggering $10 million.

Typical Investors

2) Series A Round


$10.5 million


If a startup has started to gain some degree of traction as a result of Seed stage investment, Series A rounds are often used to fuel product development improvements, and optimise the company's strategies for generating new users.

In many cases, successful seed rounds will allow SaaS startups to generate a ton of engaged users. Series A investment is then used to figure out a scalable business model, and deploy a method for monetising them.

Though angels will often invest in Series A rounds, it's usually the venture capital organisations that dictate the valuation of the round. The increasing involvement of VCs also means that Series A rounds are rapidly increasing in size: in 2015, the largest Series A round was $250 million, for ride comparison SaaS Karhoo.

Typical Investors

  • VCs
  • Angels

3) Series B Round


$24.9 million


Series A funding should allow SaaS startups to properly hit Product/Market Fit: you've developed a product people want, and found a way to successfully monetise it.

Series B rounds provide the capital required to scale this proven business model. Backed-up by an established userbase, you're ready to dramatically ramp-up your growth - often by taking on a bunch of business development, strategic accounts, marketing and customer success hires. In some instances, Series B funding will be used to expand into different market segments, or even experiment with different revenue streams.

Typical Investors

  • VCs
  • Late-stage VCs

4) Series C Round (and beyond)


$50 million (significant variance)


Big, late-stage Series C rounds are raised to fuel large-scale expansion, like taking the business into a new market (commonly international expansion), or to fuel acquisitions of other businesses.

There's theoretically no limit to the number of investment rounds taking place after Series C: some companies will go on to raise investment through Series D, E and beyond. There's also a huge amount of variance in the amount raised at this point, with the individual amounts raised varying according to the unique needs of each company.

At this late stage, the business is also regarded as de-risked enough for financial institutions to involve themselves in investment. These players often bring huge chequebooks to bear on financing rounds, generating some truly staggering round sizes. In February of this year, "cinematic reality" startup Magic Leap raised an unbelievable $793.5 million Series C - possibly the biggest round in venture history.

Typical Investors

  • Late-stage VCs
  • Private equity firms
  • Hedge funds
  • Investment banks

Make or Break

Securing investment isn't the be-all and end-all of growing a successful SaaS startup. But in an increasingly crowded marketplace, the competitive edge granted to your business through Seed, Series A, B and C funding rounds can make the difference between a runaway success and a near-miss.

Remember: your success is determined by more than your product and your userbase. It's also determined by your competitors.

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