November 16, 2021

Unusual Founder’s Video Series: Fundraising at Series A and How to Choose an Investor

John Vrionis
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Unusual Founder’s Video Series: Fundraising at Series A and How to Choose an InvestorUnusual Founder’s Video Series: Fundraising at Series A and How to Choose an Investor
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Editor's note: 
This is the last of our three-part series on our guide to early-stage fundraising and is the compilation of our key learnings as experienced investors, operators and partners to founders at the earliest stages of their journey. We collected the following frameworks and tips to help the next wave of founders as they build world-changing startups. For our deep-dive on the topic of early-stage fundraising, see our startup fundraising module, in the Unusual Field Guide.

After raising a seed round, founders will have a good foundational understanding of how the fundraising process works, as well as the company milestones investors will be looking for along the way: Team, Product, and Traction. 

In the second piece in our three-part series, we discussed how these milestones convey to both founders and investors that a company is ready for the next stage in its growth. As a company progresses from pre-seed to seed-stage, those milestones will bring the company’s opportunity into better focus, and tell us how it's progressing and what parts of the company need more attention.

The last fundraising stage we’ll talk through is Series A. As a company heads toward raising a Series A, you will start to see clear signs of product-market fit and success, and you'll be ready to scale the business by adding budget and headcount to sales and marketing teams. Most importantly, you’ll start to see revenue growth, or – in terms of our three milestones – Traction. 

Traction becomes especially important at this stage, because as you get ready to raise a Series B, it will be a key area of focus for investors. Most investors expect companies to grow to an ARR of around $8 to $10 million as they head into Series B, so as they raise a Series A, founders should have a vision for what the company will look like as it achieves that scale. Did you raise enough money to add sales and marketing support to get the company there? Is there a clear path for the product to go from 1.0 to 2.0, and are you solving for any technical debt incurred while adding key pieces of functionality that customers need?

Now, more so than in any other early stage, it’s crucial that founders look far into the future as they plan for a Series A.

We’ve covered pre-seed, seed and Series A fundraising, so let’s wrap up by looking at one of the most difficult questions founders will face as they grow their companies: Which investors should I talk to?

The three main components you want to think about are sector, stage and investment amount. Start by doing your research – Pitchbook and Crunchbase are great resources where you can look at what firms invest in your sector, at what stage and in what amount. The most important research tool every founder has, however, is their network: reach out to other founders and ask what it was like to work with a particular investment firm.

Once you do your research, you’ve found firms that look like they’d be a good fit for your sector, stage and investment size, then you’ll know enough about each to make a list of five to 10 firms and break them down into tiers. After that, it’s time to reach out and start having conversations.

Once you’re ready for more resources like this, sign up for our newsletter to get a monthly deep dive into events, guides, and opportunities for early-stage founders.


P.S. After you’ve watched these videos, we’d love to get your feedback on anything but our COVID hair (for that we appreciate your compassion!) Please tell us what you think by filling out this brief survey.

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