startup funding terms

Angel Investors

• Individual people who invest their own money in early startups.
• Often experienced founders, tech executives or wealthy individuals.
• They invest at very early risk stages based mainly on the founder.
• Typical cheque size from a few lakhs to a few crores.
• They take equity in the company and may offer mentorship and connections.

Venture Capitalists (VCs)

• Professional investment firms that invest money from a managed fund.
• Invest larger amounts once the startup has traction and data.
• Follow structured due diligence and often take board seats.
• Aim to scale companies that can grow fast and give large financial returns.
• Typical investments start from a few crores and go to hundreds of crores.

Difference Between Angel Investors and VCs

• Angels use personal money and invest early.
• VCs use fund money and invest once the business is validated.
• Angels are fast and informal.
• VCs are slow and structured.
• Angels invest based on conviction in the founder.
• VCs invest when the market and metrics justify growth.

Funding Stages

Pre Seed Round

• The earliest stage of funding.
• Startup may only have an idea or a basic prototype.
• Money usually comes from founders, friends and family and early angels.
• Goal is to build MVP and validate the idea.

Seed Round

• Startup has an MVP and some early users.
• Funding comes from angels, seed funds and small VCs.
• Goal is to find product market fit and grow a bit.
• Typical raise size from several lakhs to several crores.

Series A

• Startup has traction and a clear growth path.
• Funding from larger VC firms.
• Goal is to scale team and product and enter bigger markets.
• Typical raise size from eight to fifteen crore or higher depending on region.

Series B

• Startup has strong growth and stable revenue.
• Funding used to expand operations and markets.
• Investors expect solid metrics and proven demand.
• Larger rounds compared to Series A.

Series C and Beyond

• Startups are large and scaling aggressively.
• Funding used for global expansion, acquisitions and multiple product lines.
• Investors include large VCs, private equity funds and corporate investors.
• Often leads towards IPO preparation.

Other Important Terms

Bridge Round

• A small round used to extend runway between two major rounds.

SAFE or Convertible Note

• A legal instrument used in early rounds where valuation is decided later.

Runway

• Number of months the startup can operate with current cash.

Burn Rate

• Monthly money spent by the startup.

Simple Memory Summary

• Pre seed is idea stage.
• Seed is MVP stage.
• Series A is early scale.
• Series B is fast scale.
• Series C and later is big expansion.
• Angels invest early.
• VCs invest during growth.